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THE IMPACT OF WORKING CAPITAL MANAGEMENT ON THE
PERFORMANCE OF COMPANIES IN INDIA
Student Number: 18428612
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Table of Contents
Chapter 1- Introduction................................................................................................................. 4
1.1. Introduction ....................................................................................................................... 4
1.2. Background........................................................................................................................ 5
1.3. Rationale ........................................................................................................................... 6
1.4. “Research aims and objectives”........................................................................................... 7
1.5. Research questions ............................................................................................................. 7
1.6. Structure of the dissertation.................................................................................................8
1.7. Summary ........................................................................................................................... 8
Chapter 2: Literature Review....................................................................................................... 10
2.1 Introduction ...................................................................................................................... 10
2.2 Overview of the concept.................................................................................................... 10
2.3 Theories and Impact on Working Capital Management ........................................................ 11
Inventory Turnover ratio:..................................................................................................... 12
The theories............................................................................................................................ 13
2.3.1 The Miller-Orr Cash Management Model......................................................................... 13
2.3.2 Behavioural Finance Theory............................................................................................ 14
2.3.3 Theory of capital movement............................................................................................ 14
2.4 Empirical studies from previous works ............................................................................... 15
2.5 Summary .......................................................................................................................... 18
Chapter 3: Research methodlogy ................................................................................................. 19
3.1 Introduction of the chapter................................................................................................. 19
3.2 Research philosophy.......................................................................................................... 19
3.2.1 Interpretivism Philosophy ............................................................................................... 19
3.2.2 Positivism philosophy..................................................................................................... 19
3.3 Research Design................................................................................................................ 20
3.3.1 Descriptive research design ............................................................................................. 20
3.3.2 Analytical research design............................................................................................... 20
3.3.3 Experimental research design .......................................................................................... 20
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3.4 Research approach............................................................................................................. 21
3.4.1 Deductive approach........................................................................................................ 21
3.5 Research instrument .......................................................................................................... 21
3.6 Data collection procedure .................................................................................................. 22
3.7 Sample size .......................................................................................................................... 22
3.8 Data analysis..................................................................................................................... 22
3.8.1 Regression analysis......................................................................................................... 23
3.9 Ethical protocol statements ................................................................................................ 23
3.10 Summary of the chapter................................................................................................... 23
Reference list ............................................................................................................................. 48
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Chapter 1- Introduction
1.1. Introduction
Cash is “one of the most important components for companies”. This is important in order to
fulfill the requirement of the day to day activities. There are maximum activities that contribute
to the cash fund of the company. Thus, being an essential part, it is important to manage the
sources of the cash fund. Again, in business, the major accounting activities that are done to
manage the cash is “the working capital management”. This research has focused on reflecting
the impact of this accounting activity on Indian companies. The best example in Indian
automotive industry is MotoCorp. MotoCorp has raised the revenue with 11.7 percent with the
better performance in terms of working capital management. Bajaj Auto Ltd can also be said
as better example in working capital management. This organization has gained 8.31% revenue
according to its latest 2019 report. This has been achieved by the latest working capital
management. Automotive industries need to indulge in the greater management of the working
capital. This is because they have to deal with many suppliers which provide the raw material
on a daily basis.
Working capital is mostly required for the operational activities of the company. It helps to
deal with the specific requirements under the receivables and payables management. Thus,
managing cash means managing the payables, receivables, cash, and inventory. It could be said
that cash is a major component of “working capital management”. The four significant
components of the working capital management are receivables management, inventory
management, cash management and accounts payable management. Cash being one of the
important components of the current assets is an auxiliary to so many activities. This better
helps in meeting the short-term obligations of the company. This helps in dealing with the
requirements of the cash that are necessary for handling the operational activities. This brings
all the areas of the cash under one roof to deal with the necessities of the “working capital”.
Moreover, the companies in India are not in a position to manage their funds easily. This could
be seen from the case of Wipro Ltd. Infosys Ltd, Tata Consultancy limited or any other
industry. They have declined their stocks from 2-5% in recent times. Stocks are majorly
dependent on the revenue in order to determine the price of the stocks. It depends on their
operational activities that how they are incorporating cash in order to raise the revenue. There
is a significant impact of the decline of stocks on the operational activities. It could be said that
it is the operational activity that helps the company to deal with boosting its image in the
industry. The April- June month has seen the depreciating domestic currency because still,
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other companies have managed to perform better in those conditions. It has been discussed
earlier that MotoCorp and Bajaj have seen a better position in the market. Thus, it depends on
the company how it manages it cash in order to reflect the better “working capital
management” scenarios in its annual reports.
1.2. Background
This study is being relevant in order to see how the Indian companies are managing their
“working capital” in order to deal with the market externalities. This provides the solution to
the companies who are being deficient in managing their cash terms efficiently. It is
significantly dependent on the companies that how they manage their cash in order to deal with
the requirements of day to day activities. Working capital management is the major activity
that comes under the management of the cash. It provides measures to the companies to deal
with cash outflow. The main aim of this research work is to understand the impact of working
capital in various companies of India. Indian companies like the automobile industry have
significantly managed the working capital (Bagh et al, 2016). It could be seen from the annual
reports of the company that they are being the major performer in dealing with the cash
requirements. Bajaj has witnessed a substantial increase in the three-wheeler sale in the
domestic region (Narwal and Jindal, 2015). The number of three-wheeler sales has been raised
by 24.2% this has provided evidence for the effective “management of the working capital”.
This reflects that there is smooth running of working capital in the organization. This is because
it provides help to the operational activities. This can also be said as reason the company is
able to efficiently manage its activities which results are proper meeting the demands of the
customers. It is one of the major activities under the “working capital” management to provide
help to the production activities of the company and meet the requirements on time (Narwal
and Jindal, 2015). This is one of the greater activities that are done by the companies.
According to the financial data of some of the companies, it has been discussed that those
companies are significantly managing its cash and working capital requirements. It shows
positive impact of working capital management in an organization. It has been listed that the
company is able to meet its financial obligations within the period of maturity. Confidence has
been gathered from “efficient working capital management”. There is a major involvement of
the activities like maintaining the days turnover ratios of the companies. The cash is being
collected from the debtors within the required frame of time (Mbawuni et al, 2016). In this
way, liquidity performance of the organizations is also getting affected. The company uses
discounts and rebates techniques in order to get the fast collection from the debtors. Creditors
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are also being the major player in working capital management. The payment to the debtors is
also met on time because of the sufficient working capital in hand.
It can be said that some organizations in India are efficiently managing their working capital.
There could be a greater return of this managing activity on the overall performance of the
company. The networking capital pf the company is shown by “cash and cash equivalents”
"and current investments. It provides a better review of the company’s managing activities
related to cash and cash management (Narwal and Jindal, 2015). Every company that wants to
stand different from the competitors needs to focus on the working capital mange3ment. This
has been discussed for all the companies that are dealing at the giant platforms. Moreover, it is
required for all kind of companies that wants to help their business see better days and maintain
the normal profit to survive in the market. It provides relief from the great degree of
competition in the industry. It could be seen from the Indian automotive industry that there are
so many companies present in the market to provide a threat to the marketing approaches of
the companies.
Accounting techniques provide aid to the financing activities of the business. The business also
considers the accounting practices in order to manage their monetary events. These events
create profit for the firms in regards to the investment done by the company. Thus, managing
cash means managing receivables, payables, cash, and inventory.
1.3. Rationale
This research is significant in order to know the impact of working capital management. Along
with that, financial theory will also be evaluated. There are many companies who are facing
the problem of their profitability position in the company. For example, the IT companies of
India like Infosys, tata consultancy are facing the issue in the working capital management.
This is due to the poor management of the cash that is an integral part of the working capital
management. It looks after the trade payables, receivables, inventories, and cash. Thus, it is
required for the company to maintain the cash. This is being the major issue that why the study
is being conducted. It helps to know the lagging area of the companies that oppose them to
performing better with the working capital management. This study will also discuss
companies’ requirements to deal with the day to day requirements of the cash in the business.
It helps the companies by the means of providing cash for the procurements of the resources,
holding the inventory and tackling with the requirement of cash to pay to the creditors.
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This is being the major issue in this period because the competition is rising. Firms that are not
indulged in better working capital management could face the major issue. This is because they
could not meet the demand of the customers if they do have the proper cash to generate. There
could be a great impact on this activity as this is the minimal requirement in the accounting
field of the companies. The liquidity position of the company needs to be better in order to deal
with the shortcomings in the cash requirements. There could be different means by which a
company manages its cash. Some are indulged to get the receivables faster; some are indulged
in a late payment to the creditors and more. However, this activity could only be useful when
the company has the ability to manage the required cash during the maturity period.
This light a significant shed on the research. This is because it helps to measure “the impact of
the working capital” in the overall performance of the Indian companies. There could be more
knowledgeable about the factors which are harming or benefitting the company because of
their management activities in the working capital. There is a vital connection of cash with
working capital management. It could be said that working capital majorly revolves around the
cash and cash equivalent. The better the working capital, the best is the liquidity of the
company.
1.4. “Research aims and objectives”
The aim of the research is to measure the impact of “working capital management” on Indian
companies.
Objectives are:
To understand the need for “working capital management” in the companies.
To know the several components of the working capital management
To know the “impact of the working capital management” of the performance of the
Indian companies.
1.5. Research questions
In which way working capital in influencing day to day business activities?
What are the several components of the working capital management and how they will
benefit Indian companies?
What is the “impact of the working capital management” of the performance of the
Indian companies?
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1.6. Structure of the dissertation
Figure 1: Structure of the dissertation
(Source: self-created)
1.7. Summary
It could be summarized that there is a greater role played by the “working capital management”
in increasing the performance of the companies. This could help to manage the circumstances
of the shortfall in the cash. A better way is given to the development of the company if the
working capital requirement is met. There could be a better impact on the activities that are
“related to working capital management”. This could help to run with the ample amount of
cash required for the daily activities of the business. It provides the best way for companies to
maintain receivables and payables. Inventory could also be efficiently handled by the
companies. It has been from the instance of some companies that it has been able to “maintain
the working capital”. The “liabilities of the company” are also small and the maturity period is
also enough to help the cash management. However, there are companies like Infosys and tata
consultancy that has faced the problem in recent times. Companies could increase their image
in the industry and in the money market by maintaining a proper amount of cash all the time.
It could be classified an issue because it could make a greater impact on the companies. Rise
in the competition is also the major reason for studying this particular topic. This could provide
aid to the losing revenue of the forks. There are many activities that are considered in this
activity. For example, managing cash and inventory could be a greater part of this particular
introduction
litreture review
methodology
data analysis
conclusion
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issue. This could bring more problems if the working capital is not met by the company. There
could be cases of insolvency which is the most dangerous part of the inefficient working capital
management. This is because a fund is required to be injected in the day to day activities in
order to deal with the operational activity's requirement. Thus. It is being an essential part of
the companies to reflect their working capital in the financial reports. This would help the
stakeholders to use the company's position in meeting the requirements of their interest.
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Chapter 2: Literature Review
2.1 Introduction
The study would explore the impact of working capital on the business of various sizes upon
the firm's performances both in the long and short term. The performance of the business based
on the WDC is been investigated here where the various other scopes and theories are been
revised in here for the undertstanding of the methods and its ways to implement them. Working
Capital Management (W.C.M.) is the core of any business to work on the subject where the
models of measuring the firm's capital are essential for its importance in the industry (Al-
Debi’e, 2011). The model has different types of measure; its W.C.M. like the cash capital cycle
is estimated alongside the firm's brand equity in the market and its performance. This makes
the W.C.M. a day to day issue for the business of the day to make the needful procurements
and produce to be valid across the time length in a market of its belonging. The importance is
thus of such influence which makes the firm have the faith that it has the resources enough to
continue its operations with the receiving and distribution of the cash to the stakeholders (Al-
Debi’e, 2011). In this section of the research, secondary data from various books, journals and
websites were collected and analysed in the form of literature review.
2.2 Overview of the concept
The business has to incorporate the following for its service of W.C.M.:
Get the amount of money it has in its hand
Have an idea of how much of credits can be extended to the consumer checking the
limits of its ability
To get an idea of where to obtain short term loans for short term needs
The working capital is with the firm is for short term creditors who in turn sees the long term
via the assets and resources the business has. So, the capital source which needs to have not a
near term payment is the capital, which is of interest (Marobhe, 2014). Hence the businesses
do the best possible job in terms of financial assets from long term capital source which doesn't
need to wait for a time but utilize the best of the market is favoured in terms of credits by the
stakeholders. The needful loans come in with time-based on how well the project is projected
to give the value back to the investors. In the past, there are many examples of business going
out of business due to lack of working capital or mismanagement of it (Alavinasab and
Davoudi. 2013).
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Further, the companies have not shown the ability to fulfil the organizational goals due to
improper W.C.M. in the business sorceress. The investors or short-term creditors look into the
targeted working capital balance to make the working capital and its efficiency of the short
term in generating the needful results they seek out their investments when it is due to be rapid
by the business. However, the working capital is not the best judge of how the company is
doing since the build-up of unsold products may rise it, but its increase in unsold inventory
(Al-Debi’e, 2011). This has to be kept in mind by the investors where the necessities of the
stagnant inventory build-up is the cause of the enhanced working capital for a business there is
something wrong with the company of this day and age where the production is based on
demands and have lesser option to be stored if not a new release. Hence to get the proper figure
of the Working Capital in business, the factors apart from those described above have to be in
place to judge with other various criteria in the industry (Mathuva, 2010).
There are many definitions of working capital. One suggests that the working capital is the
measure to which the current assets of the business can be valuable until it loses the value to
repay the creditors. Hence the suggestion that came out was to do a monthly audit of the
business assets and liabilities to ensure that it has enough working capital to operate before it's
too late in repaying the creditors (Öner, 2016). The significance to the people of finance is the
significance of the appraisal of the liabilities is compared to its liquidity where the strength
lies. The total net asset of the business over its total net debt is called the working capital of the
company where the number of similar transactions is most needed to make the best use of the
assets as the current capital of the business. So the working capital can be suggested as the
asset that can be converted into cash so that the resources can be brought in like materials,
labour before the fixed assets can work to give the business the production that they would like
sale for the company and can develop the finance activities in industry like sales or services
(Alipour, 2011).
2.3 Theories and Impact on Working Capital Management
The business is always doing projects to expand and be sustainable in a market where the quick
ratio serves it an excellent glance to its current position compared to the competitors to take
bold decisions based on the W.C.M. (Baltagi, 2005). This QR can give immediate liquidity
more efficiently as it is taken into account the time needed by the business to turn the liquidity
into cash. The Credit Ratings (C.R.) have often been used to give the idea of the businesses
ability to pay back its short- and long-term liabilities with the assets that it has with its short-
term liabilities which can be paid back with the holdings of short terms (Öner, 2016). So, the
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higher the current ratio of business, the higher is the ability of it to pay back the creditors. Here
the idea of Quick Ratio is to be understood. The QR or quick ratio is the total current assets
and inventory divided by the total liabilities, which is also termed as the acid test ratio (Alipour,
2011). The ratios those affect the working capital are discussed here in.
Inventory Turnover ratio: This is the ratio where the cost of goods sold is divided by the average
value of the product inventory is the business giving the idea of how quickly the inventory
turning is for the business (Sharma and Kumar. 2011). So, for the company, a low turnover
means lesser sales while higher makes it have better deals, so a higher inventory suggests that
the transactions are flat while the other part of it is high sales or inefficient buying for a low
stock due to reduced production. Hence the way one is looking into the Inventory Turnover
ratio sees it best considering all the underlying factor of sales or market dynamics to guess at
how efficient the business is going through at that point of time (Mojtahedzadeh et al., 2011).
Here the Working capital is the flow of the funds from one location to another where the fund
is circulated back to the business with profits. The fund used by the company to buy products,
infrastructures and assets, pay people for has to be repaid in the form of money that would
come back to the business post-sales to fill the gap of funds for next production cycle. This is
the working capital on which the business relies upon for the money to channel back for the
long-term production and recommence the period of the following output for the continuity of
the venture. For the continuity the business has to either borrow or pump in money from
investors for the continuity of the productions which is the working capital that shows the
investors or loan givers the clue of the assets that the business has to what it is asking for to
make a judgment of the worst-case scenario to pay the company the needful funds to continue
the processes (Gill et al., 2010).
The business needs working capital for the continuity of the production cycle that it has. So at
times, this may tie up the firm's funds into the time the materials were purchased and the time
consumers for the purchase of equipment for the next batch production (Mohamad, and Saad.
2010). So, the use of the working capital for the time where the output is out in the market for
sales to come back to join the funds the business has to have the funds to keep the operations
and expenses running which is the working capital for the company. The firms of the day have
working capital at all stages of production and services since the continuity is critical for the
market sustainability in the competitive markets of the day. This is called the operating cycle
or cash to cash cycle for the business (Mohamad, and Saad. 2010).
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The theories
2.3.1 The Miller-Orr Cash Management Model
Miller-Orr model assures where the underlying problems those are facing the managers to keep
enough cash in hand and meet the demands of day to day operations while having a lesser
amount to invest into the opportunities.
The model of Miller and Orr tries to keep a balance of upper and lower limits of the cash with
the managers to spend on both the opportunity and regular expenses based on the borders and
business capabilities. So the model shows the upper and lower limits, which are triggers to the
sales of the upper limits, which would better balance the cashback to an optimal minimum
point (Nazir and Afza. 2009). So it guides the upward and lower trends of the business with
an optimal choice of an acceptable limit for the company of a specific size with a particular
frame of time to generate the returns. So this model can be used by the businesses to monitor
their limits on both sides and keep the check on the cash limits it can go up to manage it in
terms of working capital (Mohamad and Saad. 2010). However, when the cash balance goes
to a lower limit the cash balance at the lesser time limit, making a sale of the purchasable limits
of the cash flow likewise, which makes the outflows possible as well. So, it helps in managing
the deadlines and get the awareness and take all secured steps to keep up to the limits when it
is beyond the given threshold (Gachira et al., 2014). The firms those don't use a daily statement
of cash flow for various styles of business can be helped by this model to keep track of their
investments and returns as per the timelines daily (Baños-Caballero et al., 2004).
The lower limits here represent the safety stock of cash with the business in any case with the
factors alongside like the firm's liquidity requirements with market securities and transaction
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cost of buying and selling of the securities beside the standard deviations (Nazir and Afza.
2009. The business adopts this model for its all practicality for the cash flow statements for the
day with limits to take steps in time. The model has proved to be very efficient for the working
capital management for many businesses and still can make it achieve the desired objectives
(Chiou et al., 2006).
2.3.2 Behavioural Finance Theory
The business finances of a working business needs to have the aspects those which makes the
best of the results for the business and its various aspects. This would give the best results for
background and companies are assumes to have the rationale and the market to understand that
the market financial context as the basis for the calculation of the working capital or more
precisely the validity of the business in the long term (Şamiloğlu and Akgün. 2016). When the
market project opportunities, the company takes its chances where all participants receive their
chances (Şamiloğlu and Akgün. 2016). The proponents of the idea suggested that the business
ideas would click as per the studies doen so that the business may convince the investors to
invest into it. Such disclosures would make the people interested in investing do it for the long
term which helps the company to be more balanced to go for investment with utmost safety
with the confidence of the investors in mind to make the best use of the working capital or
gather it for the short term (Blundell and Bond. 1998). So here the basis of collecting the
operating money, if the behavioural aspect of the business which takes in the opportunity
venture into new avenues those, they find promising are focused upon.
2.3.3 Theory of capital movement
This is a bit of first of its kind of method of working capital in terms of the job that it is based
on the Hymes market theory of the 1960s which proposed the idea of globalized business
presence as a mark of the businesses will to be based on various economies to gather the best
of resources from there and maintain an oligopoly which suites the consumers (Ogundipe et
al., 2012). The diversification and outbound approaches make the businesses earn more and
give the best for their stakeholders back home. So, it was an excellent way to see wealth
generation from a tangible and tactic way where the opportunities are more (Nazir and Afza.
2009). Further, the Vanhom's derivation of the late 1960s suggested that the businesses set their
business away from home to avoid the competition at home markets (Azeez et al., 2016). The
theories all correct in the business world of today where the game is more at home and abroad
as well. The business which have the larger market share can have the value which attracts
more of investments for the business.
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2.4 Empirical studies from previous works
The cash management in the European market was studied where the evidence of quick ratio
and proof of the current positions were verified by the research done by the University of Vaasa
(Baños-Caballero et al., 2017). The cash management was compared with the behaviour of the
business to manage the cash and few other micro variables within the company as the quick
ratio gave the best results each time, and the hypothesis of a more advanced cash management
statement was rejected due to the coefficient of the independent variables being void in all
cases (Hsiao, 2003). A similar investigation into the firm and its financial behaviour was done
in Spain where the cash management behaviour has been studied. The research or survey
undertook the Net trade cycle as the cash conversion ratio for the business and found that there
is s intense negativity between the firm's NTC and firm's efficiency. The study concluded the
established belief that the long-term cash efficiency makes the business more cash efficient. It
suggested the more prolonged the CCC can perform better when the firm has generous credit
policies to its extended cash cycle. So, the general view of the short-term W.C. was negated
with a long-term view in this study (Azam and Haider. 2011).
The other hypothesis is if the business assets exceed the liabilities, the net working capital is
more to the obligations; then it gives rise to positive opportunities for the business. Since there
is more working capital, so the utilization of the company where the investments can be made
to get more out of the working capital that it has (Azeez et al., 2016). The asset also makes the
firms go into liquidity where the best utilization is done for the assets, and if there are any dues,
it can be met (Iqbal and Zhuquan. 2015). So, adequacy of the assets is s short term application
that business should find a window from in between. The liquidity is the contribution that the
firm does for its greater strength and ability development for the long run, such is viable.
However, on the other hand, the larger the liability, the lesser the liquidity that one may see
from the business. The research concluded that the company fails mainly due to lack of working
capital in the industry (Gitman and Maxwell. 1985). So, the acquisition of the free market and
the buying is only made after the business has enough working capital abilities to sustain in the
long run. The working capital policy of the company has to have the concerns of the
management of the current assets and the proper acquisitions for the best utility of the assets
like materials, workforce etc. The management of the firm has to be acquainted with these
assets that they would use for the benefits else the venture fails. This makes the right man at
the right place at the right price a very potent factor to consider by the business to best utilise
its working capital. Some have a policy of seeing the long-term payments to be made based on
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the value of the current asset which is a kind gesture too to view the ability to generate and
sustain the working capital of the business (Charitou et al., 2006).
Hence the business has an idea and determines the cash ratio for a company to make the
appropriations of the liabilities to what is to be received by the company in due course. Thus
here the working capital means that the firm have the best of abilities for the olong term
operations. So, a proper working capital needs good asset management and financing to support
it till it starts to generate on its own to sustain and thus give profits in the long run. In a study
of the Greek food industry, the current ratio and the profitability among the firms is has
demolished the fundamental ideas of the relations between the aforesaid (Deloof, 2003).
However, Dell could use liquidity even when they are growing and generating a huge working
capital that make a lot of return at the same time gives the opposite dimension. It suggested
that Dell had a 45 days period to return to its vendors while performance of the cash was
maintained too to keep the business generate the funds to consolidate its growth and made the
burden lesser for the external financing needs to focus upon due to the cyclic process its has
created of the limited period (Hair et al., 2016).
Nevertheless, the argument can be supported by favourable discounts and available
opportunity. In some cases, the liquidity is fatal, and it loses the controls of the business
performance, making it go extinct (Iqbal and Zhuquan. 2015). So, the conclusion is that the
management of the working capital is one of the ablest aspects that generate the needful funds
for the business to keep it sustainable. The overall financial management metrology has ways
to use funds where the substantial proportion of the financing is dedicated towards the
aggregate financing where the financers are investing based on few known aspects of the
markets those can be exploited (Dong and Su. 2010).
So, managing each aspect of the current asset in business is vital for its utilization for the
working capital to supersede the liabilities which can only keep the business alive and growing.
The role of financial capital management makes the company efficient to gather enough
working capital at all times when needed for the needful scope or venture investments
(Erasmus, 2010.). Nevertheless, the market potential and the product attractiveness in the
market that it aspires to be in has to be made clear to the investors who would then give the
needful support to venture beyond the limited scope (Kaddumi and Ramadan, 2012). The
management makes it sure that the working capital is best used for the business utility like the
use of development of the money needed to keep the working capital intact to invest with
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confidence for a long-term venture capacity been added to the processes. The studies of Japan
and Taiwan suggest that the relation between the cash ratio and the profitability of the firms
are good which gives them to gain quick ratio which in turn gives the more significant boost
for the long term and enhanced value creation by the businesses (Raheman et al., 2016). The
working capital invested in a business is maybe in the form of current assets which the industry
finds suitable to sell in the short term to get the ash out of them. The investment in the existing
assets makes the companies convert all its assets into cash. So, the firm's liquidity has been
having been reducing on its placement on assets or getting lesser investments on assets (Falope
and Ajilore. 2009).
The current assets and long-term liabilities are the critical aspects that the W.C.M. considers in
its evaluation of the business status as on date. The liquidity to gain assets observer the rate of
return over other projects may prove to be a misstep in some cases, which is there in the past
example as well. So, the role of the W.C.M. is clear from here which entails its importance.
The case where the credits to consumers have proven useful for the businesses but the policy
was adopted in Laos with a high-risk possibility of non-fulfilment of the loans. The process is
a long-term oriented approach where the government gives the business a chance to get the
consumers, which in turn would develop the economy in the long run (Field, 2005). However,
this model may fail, given the capacity of the state to bear such loans to the people who in turn
may not benefit from the long terms as thought by the government. The other studies show that
the government treats the cash as assets like stocks and debtors in the market. So, it has shown
how the ratios work and affect the business functions and markets (Field, 2005). So, the
optimal choice for the business to choose a more elaborate approach like finding the
opportunity, costs related, risks, contingency plans, feasibility like aspects are all selected for
the same. The Nigerian stock exchange projects the quick ratio to be the best W.C.M. projectile
while in other markets, it is different for various factors (Lazaridis and Tryfonidis. 2006).
The ability of the business to incorporate the working capital and profitability it shows that the
quick ratios are generally granted as the moving capital calculator, but there are other aspects
related to business based on the way the W.C.M. is conducted within the company and its
practices from the practical side in a market is essential. The best returns such quick ratios to
working capital makes the risk versus return abilities to be identified and thus be utilized for
the launch or have more of production to gather more share. In an Indian case, working capital
management and profitability were studied, which also plays a massive role in the Bangladeshi
economy next door as well (Malik and Bukhari. 2014). The working capital management is
18. 18
the issue that was studied where the profitability with the cost of operations or working capital
had a massive gap for the nation’s textile industry as a whole. The case of Reliance Power is
one where the business had to shut down due to the lessning of working capital for the business
which makes the issues more unreliable for the busuiness for its long term. Thus, the nature of
the company, context, economy, needs and demands of the market, quality supply and
production are the key issues those needs to be addressed for the long and short term for the
business based on its capabilities (Lamberson, 1995).
2.5 Summary
Working capital's effect on profitability and the way it projects itself says a lot about the
management of the processes and its execution with utmost efficiency. The competence of
Working capital management is critical for the business to assess the business situation, market,
opportunities, cost of new scopes, vulnerabilities etc. before they can take a just decision
(Raheman and Nasr, 2007). The efficiency for the people and the processes are to be improved
along with a good supply of cash flow to keep the business profitable implementing the changes
therein. The working capital management is one vast aspect of the company, which it has to
manage with utmost competence to be valid in the market and get a name for itself (Abuzayed,
2012). The risks are only worth taking when a good deal of research and viability has gone into
it for the stakeholder's confidence. So, the performance is critical for the various aspects that
keep the working capital viable for the business.
19. 19
Chapter 3: Research methodlogy
3.1 Introduction of the chapter
Research methodology comprises all the research methods and strategies that are
applied to a given field of study. The section presents a clear picture of the research design,
philosophy, and the target population. Moreover, the applicable data gathering procedures and
methods are evaluated. Further, every researcher has to follow ethical principles while
conducting any research, thus, the methodology also presents the ethical considerations that
are abided by investigator during the research.
3.2 Research philosophy
Research philosophy is a paradigm that can be regarded as researchers’ belief about
how the research problem is addressed. It presents the belief that how data about a given
phenomenon should be gathered, analyzed and materialized (Kumar, 2019). It is mainly
characterized by ontology, epistemology and methodological disposition. Ontology refers to
the nature of reality, contrary to it; epistemology is concerned about how the researcher does
uncover the hidden facts and knowledge. Thus, ontology indicates the nature of the existence
of a phenomenon whereas epistemology shows the relationship between investigator and
reality and guides the researcher about the way that how reality are captured. Positivism and
interpretivism are the two popular research paradigms that a researcher can apply to the given
area of research.
3.2.1 Interpretivism Philosophy
In this philosophy, researchers believe that reality is relative and socially constructed.
Interpretivists prefer flexible research methods to develop a clear understanding of the research
problem. It believes that researcher and informants are mutually interactive therefore,
researchers play an important role in the area of investigation. Interpretivist aims to interpret
the human behavior i.e. motives, subjective experiences, etc. They use qualitative methods
such as unstructured interviews, observations, etc (Ledford & Gast, 2018). Interpretivists
contend that reality can be fully understood only through subjective interpretation. They admit
that reality can be interpreted in many ways; these interpretations themselves form a basis of
scientific investigation. The method is criticized due to availability of a great room for
researchers’ biases because research is largely affected by personal viewpoint.
3.2.2 Positivism philosophy
Ontology of the positivism research paradigm believes that the world is external.
Henceforth, the researcher focuses upon objectivity regardless of his or her perception.
20. 20
Positivists prefer the application of highly controlled and well-structured approaches and use
quantifiable methods and techniques such as structured questionnaire, social surveys, official
statistics, etc. to maintain high credibility and reliability (Quinlan et.al. 2019). They maintain
a clear distance between their own belief and research. Targeting objectivity, investigators
maintain a clear distance between facts and value judgments and scientific reasons and their
own experience and apply logical approaches to address the research problem. This study
adopted the positivism research philosophy. In the context of the given area of study; the key goal
is to explore all the factors that affect working capital management on the performance of
companies in India; therefore, positivism research philosophy is applicable into the research
proposed herewith.
3.3 Research Design
It refers to the research methods and techniques that are adopted by the researcher to
combine various research components in a logical and cohesive manner, to address the research
problem effectively. There are various kinds of research designs that are enumerated
underneath:
3.3.1 Descriptive research design
As the name implies, descriptive research is all about explaining or describing the
research problem or issue in a thorough manner. In this design, researcher focus is to describe,
determine or identify the issue in detail (Nardi, 2018). Thus, applying this design, investigator
attempts to provide detailed insights of the research issue.
3.3.2 Analytical research design
Unlike descriptive, as its name, in this design, researcher aims to gain knowledge of the
research issue. Henceforth, the researcher is more concerned about the cause and effect
relationship (Ledford and Gast, 2018). The researcher prefers to conduct thorough research and
thereby examine the problem along with the reasons and its impact as well.
3.3.3 Experimental research design
Under this design, the researcher attempts to identify all the independent factors and
explore its impact on the dependent variable. It is one of the most applied research designs
because the investigator not just explore the hidden facts and describe the issue but also identify
the cause-effect relationship and provides the solution (Green and Thorogood, 2018). The
method is most commonly applied in the field of social science to analyze human behavior.
21. 21
3.4 Research approach
Research approach comprises a series of steps of various assumptions to choose
methods of data collection and analysis (Quinlan et.al. 2019). The choice of research approach
is broadly based upon the nature of the research problem. “Inductive” and “deductive” are the
two popular research approaches that are examined below:
3.4.1 Deductive approach
It is object-oriented and testing theory that moves from generalization towards more
specific, henceforth, also called a top-down approach. Arguments are mainly based upon laws,
widely accepted principles and facts (Briggs & Coleman, 2019). In this approach, researchers
formulate a hypothesis and test them by applying suitable statistical tools and methods to
uncover the facts.
3.4.2 Inductive approach
Inductive reasoning, on the other side, aims to generate new theory. It moves from
specific observation towards generalized concepts and theories, therefore, also known as
bottom-up approach. In this approach, arguments are mainly based upon experiences and
observations (Litosseliti, 2018). Instead of hypothesis, investigators formulate research
questions to study the research issue.
In the current research, deductive research approach is used. The selected approach
helps in understanding the factors that are responsible for of working capital management on
the performance of companies in India. In addition, as the approach is concerned with
development of a research questions based on the existing theory as well as designing a
research strategy in order to test hypothesis. Moreover, deductive research approach explores
a known theory or phenomenon and tests if that theory is valid in given circumstances. As the
deductive approach follows the path of logic most closely, the selected approach is justified in
the current research.
3.5 Research instrument
The questionnaire is the research instrument used for the current study that presents a
set of questions to gather the required set of information from the target respondents (Kumar,
2019). With regards to the present field of study, a 5-point likert scale is used by the
investigator. The scale enables respondents to express that how well they agree or disagree
with the given statement. The questionnaire comprises demographic questions and then
specific questions are included that focuses on the chosen variables to judge that whether the
22. 22
use of advanced technologies, efficient workforce, high staff productivity, staff benefit &
compensation programs and IT management contributes towards business continuity or not.
In the current research, a five-point Likert scale ranging from 'strongly agree' to
'strongly disagree' has been used as it has been most recommended by the researchers that it
would reduce the frustration level of respondents and increase response rate and response
quality.
3.6 Data collection procedure
The survey is conducted online wherein an online questionnaire would be created on
gogole sruvey and sent to the chosen people on their respective e-mail address. By this way, it
helps the researcher to save time and resources because the questionnaire was sent online. It is
also convenient for the respondents too because they can send their responses online. In an
attempt to ensure data authenticity, researcher use voluntary consent forms prior to the survey,
respondents have to fill this form and assure their free consent or willingness to become a
survey participant.
3.7 Sample size
Simple random probability sampling technique was used to select the respondents. 25
staffs working in fiannce based companies were selected to participate in the survey. In
addition, 3 managers were selected for interview.
3.8 Data analysis
Data analysis is one of the most important parts of methodology that refers to the
process wherein researcher tends to apply various financial, statistical and/or logical techniques
to evaluate the collected data. In other words, it is a process of inspecting, cleansing, analyzing,
transforming and modeling data.
The choice of data analysis method heavily depends upon the type of data collected
whether quantitative or qualitative. Quantitative data was used in the research that are
expressed in numerical form is often analyzed applying financial and/or statistical methods
(Ary et.al. 2018). On the other side, qualitative data are about motivation, perception, attitude,
and experience, therefore, they are examined through thematic test wherein various themes are
developed presenting the pattern that aims to pinpoint the data pattern. Every theme describes
the characteristics of the target phenomenon that addresses the research problem (Kumar,
2019). With reference to the given area of study, quantitative data has been collected by
conducting survey therefore; statistical methods have been applied so as to examine the
research problem. In this, different kinds of tests such as descriptive statistics, correlation,
23. 23
regression, etc. have been applied to draw useful interpretations from the gathered data about
the chosen research phenomenon.
3.8.1 Regression analysis
Regression analysis is considered as one of the powerful statistical methods, which
allows to analyze the relationship between two or more variables of interest. While there are
several types of regression analysis, the influence of one or more independent variables on a
dependent variable. In addition, regression analysis includes several techniques for modeling
as well as analyzing various variables when the focus is on the relationship between a
dependent as well as independent variable. Regression test is used to evaluate the impact of
independent variables over the dependent variable (Litosseliti, 2018).
3.9 Ethical protocol statements
It is important for the researcher to comply with ethical consideration. Within the
current area of research, the investigator will ensure to maintain ethnicity by complying with
all the ethical principles. As researcher is required to collect primary data using survey,
therefore, the researcher will maintain confidentiality to protect the data from any unauthorized
use. Moreover, the researcher will use the consent forms to get the prior approval from the
respondents whether they are voluntarily ready or not to take participation in the survey. It
enables the investigator to generate highly authentic and reliable data. Further, the researcher
will ensure data safely to avoid the possibility of any kind of manipulation. Apart from this,
the Data Protection Act is abided by to assure data safety and security.
3.10 Summary of the chapter
From the above methodology, positivism philosophy and deductive approach have been
used. Further, the study is based on analytical research design, wherein researcher would gather
data through the means of survey, and it is analyzed through applying various statistical test
and analysis. Primary data have been collected using online survey. Simple random sampling
method is used in the research. Quantitative analysis method has been used to analyse the raw
data obtained from the survey.
24. 24
Chapter-4: Analysis & Result
Startups in any country are specifically of two types. One of those is that starts something from
the ground up and something which none can think about to and is often of outstanding. That
particular type of the startup is hard to formulate but if once will be created may face the
unbelievable growth in the wealth and strategy. Another type of startups is that one sees around
themselves are generally the ones which do not seem to reinvent or renovate the wheel of
progress (Kaddumi and Ramadan, 2012). They are more interested to add the flavor of the
previous type of organizations and add something new with it to show the renovation and are
invention of the type of organization. This kind of startups make the sense of the market
strategy and so they adopted one of the specific organizations and make the renovating ideas.
The government of India are more interested in those startups which shows the innovation
through the marketing and selling strategies. Thus, they can get fund and those funds are
allotted from the central bank that is Reserve Bank of India (Erasmus, 2010.).
Indian startups generally face challenges and barriers and some good opportunities from the
public side and from the side of government (Hair et al., 2016). Based on the challenges by the
startups, the government will decide for the funding which will result in the capital
management for India and for the startups as well. So, the challenges are the important
parameter to the startups to show their eligibility for getting the funds (Kaddumi and Ramadan,
2012).
The challenges are defined and discussed below based upon which the startups of the
Entrepreneurships get
Culture - Most of the companies that are basically the startups are based on Entrepreneurship.
Startups are only the latest phenomenon in the country India. This is only in the last few decades
that people in India have been moving from being the body to seek the job to the body who
basically create the job in the market. Executing a startup is very tough and challenging and
every country faces more failures than that of the success (Charitou et al., 2006). This may be
due to culture and influences that are the basis backbone of the Entrepreneurship. Previously,
in India, there was no concept of Entrepreneurship as for the lack of knowledge and
unavailability of resources. But now the government have allotted funds for the
Entrepreneurship and startups and this help to make the capital management in India.
Depending upon the type and size of the startups, the funds is allocated and the allocation is
dependent upon the location of the startups also (Hair et al., 2016). The location basically
25. 25
defines the culture and thus defines the stability of the business there. So, depending upon this,
the finds are allotted to the Entrepreneurs and the overview of shown below.
Table-: Startups by city
Start-up by City
City No. of Start-up
Agra 2
Ahmedabad 35
Bangalore 628
Bangalore / Palo Alto 1
Bangalore / San Mateo 1
Bangalore / SFO 2
Bangalore / USA 1
Bangalore/ Bangkok 2
Belgaum 1
Bhopal 2
Boston 1
Chandigarh 10
Chennai 66
Chennai/ Singapore 1
Coimbatore 3
Dallas / Hyderabad 1
Delhi 4
Goa 7
Goa/Hyderabad 1
Gurgaon 240
Gurgaon / SFO 1
Gwalior 2
Hubli 1
Hyderabad 76
Hyderabad/USA 1
India / US 1
Indore 9
Jaipur 25
Jodhpur 1
Kanpur 4
Karur 1
Kerala 1
Kochi 2
Kolkata 19
Kozhikode 1
London 1
26. 26
Lucknow 1
Missourie 1
Mumbai 446
Mumbai / Global 1
Mumbai / NY 1
Mumbai / UK 1
Nagpur 1
New Delhi 381
Delhi / California 1
Delhi / US 2
Delhi/ Houston 1
York/ India 1
Noida 78
Noida / Singapore 1
Panaji 1
Pune 84
Pune / Dubai 1
Pune / Singapore 1
Pune / US 4
Pune/Seattle 1
Seattle / Bangalore 1
SFO / Bangalore 1
Siliguri 2
Singapore 5
Surat 1
Trivandrum 2
Udaipur 1
Udupi 2
Vadodara 9
Varanasi 1
This tables shows the number of startups in India (Kaddumi and Ramadan, 2012). Those
startups are established due to the demand of the business perspectives in those cities. The
demand of the business makes the hype of the Entrepreneurship in India. It can be seen that,
some city are having high numbers of startups and this may be for the demand from the
consumers and the support to the government (Hair et al., 2016). So, this is the active support
to the startups to make the capital in India through the business and this will be helpful to
generate revenue for the government by making money from the customer as they are there for
such execution. The below figure shows the top 10 cities and bottom 10 cities of the number
of startups.
27. 27
Fig-2 Analysis of Top-10 cities for number of startups
So, it can be seen that the Bangalore is facing the highest number of startups. Bangalore is well
known for the IT farms and everyday there are the new opportunities for the job. So, there most
of the people, after doing their job, should be interested for their own startups. They will
generally survey for the opportunities and find most relevant things to do (Charitou et al.,
2006). The local startups will be dependent upon the local culture and gradually this can be
made bigger in size with the support of the consumer that will be satisfied of their services.
Below the analysis shows the bottom 10 cites in India with number of startups (Kaddumi and
Ramadan, 2012).
28. 28
Fig-3: Analysis of Bottom-10 cities for number of startups
From the analysis, it can be seen that Bhopal is facing the lowest number of startups in India
and it is for the local culture as well as the demand of the product which will not be fulfilling
the requirement and obviously the capital management.
So, depending upon the startups and the quality of operation and management, the funds are
provided by the government to the startups so that thy can grow more and can operate on the
basis of the capital and demand so that they can make the balance in between these two and
can propagate towards success (Charitou et al., 2006). The analysis will be done of the basis
of startup funding by the government and the table is shown below:
Table-2: Startup Funding
Investment by City
City Amount of Investment
Bangalore 8383774108
New Delhi 2750247500
Mumbai 2343694500
Gurgaon 2067821500
Chennai 411105000
Pune 282153000
Hyderabad 194762000
Noida 170338000
Ahmedabad 98186000
Pune / US 68500000
New Delhi / US 67000000
Jaipur 35560000
India / US 30000000
Chandigarh 26100000
USA/India 16600000
Bangalore / SFO 15300000
Pune/Seattle 15000000
Kolkata 13865000
Udupi 12000000
Mumbai / Global 11000000
Bangalore/ Bangkok 9900000
Bangalore / San Mateo 8000000
Vadodara 6040000
Bangalore / USA 5000000
Singapore 3850000
Boston 3000000
29. 29
US/India 3000000
New York/ India 2950000
SFO / Bangalore 2700000
Goa 2380000
Bhopal 1900000
Indore 1672000
Coimbatore 1650000
Gurgaon / SFO 1200000
Bangalore / Palo Alto 1000000
Dallas / Hyderabad 1000000
Delhi 1000000
Lucknow 1000000
Pune / Dubai 1000000
Gwalior 900000
Panaji 825000
Hyderabad/USA 600000
Belgaum 500000
Missourie 350000
Noida / Singapore 300000
Kanpur 220000
Mumbai / NY 200000
Jodhpur 160000
Trivandrum 100000
Varanasi 52000
Mumbai / UK 40000
Kerala 27000
This table shows the list of entire cities of India which gets the relevant funds for the startups
from government. The Government will release the amount to the startups ot get it back in
terms of service and taxes (Azeez et al., 2016). So the high amount of funds will be given to
the startups, the more return can be obtained. The funds are released with high amount to those
cities which are capable of manipulating good business and hence catch the eyes of the
government and the customers also. The to-10 cities with capital funds are shows below:
30. 30
Fig-4: Top-10 Cities with Capital Funds
So, the figure shows that Bangalore is having the high amount of fund and that is already shown
in the previous analysis that Bangalore is having high number of startups as there are the
number of Entrepreneurs is high and so he capital management is good enough to gram the
market. Hence, the bottom 10 cities are shown below which shows the analysis of the 10 cities
having lowest funds as they have not initiated good startups yet (Azeez et al., 2016). So,
Government is not releasing enough funds there as they know for the return will be satisfactory
if high amount will be released. So, the companies that is taken by the government is to release
good capital for the managing procedure of the cities which are well eligible for good business.
Thus, the Capital management good enough for those cities. The analysis is shown below:
31. 31
Fig-4: Bottom-10 Cities with Capital Funds
So, the things are clear about the funding of the capitals is that this can be obtained if the
challenges are met the requirement of the nation and has the fruitful outcome for the naion.
Hence the government of India support with the funds with certain amount where it is required
(Azeez et al., 2016).
Startup India may be a theme of the govt of India to support startups and to encourage and
encourage new budding entrepreneurs. First, declared by the Prime Minister of Asian nation
on fifteenth August 2015, the campaign was launched on sixteenth Jan 2016 by the them
minister, Mr. Arun Jaitley. The event was attended by high ranking officers of business homes
and startup entrepreneurs (Dong and Su. 2010). underneath pop out Asian nation the govt has
provided many loan schemes to support the startups. As on 2018, the overall capital allotted to
the theme was Rs twenty,000 Crores. Government has additionally planned to setup startup
support hubs in NITs, IISERs and IIITs. Main objective of the program is to make an
atmosphere that is contributing to growth for startup businesses in Asian nation. Startup Asian
nation Standup India may be one more theme launched by the Modi administration for
advanced way forward for the Indian youths (Charitou et al., 2006).
Mentoring – Initiating a startup is the perilous and vry often a lonely and challenging journey.
The initiator may have the co-founders, but he may not necessarily possess the business acumen
32. 32
to succeed. Having a brilliant idea is different from making that idea a business success. For a
startup, it is very important to have mentors who have been through a similar process of starting
or have business experience. A great mentor is often what separates success from failure by
providing valuable inputs (Azeez et al., 2016).
Depending upon the parameters, the government starts segregating the nation based on the
startups and funding them to managememt with the implication of GDP. The segregation of
the country with respect to zones are shown below:
Eastern Region
Region State
Sum of Authorized
Capital - Total
Sum of No. of
Companies - Total
EASTERN
REGION
Arunachal
Pradesh 0.43 11
Assam 9.01 190
Bihar 0.04 3
Jharkhand 0 0
Manipur 0.15 3
Meghalaya 0.84 15
Mizoram 0.11 6
Nagaland 0.11 10
Odisha 6.1 225
Tripura 0.15 11
West Bengal 189.64 1659
In eastern region, the highest number of startups are found in the state of West Bengal where
as the least number of startups are found in Jharkhand. So, the West Bengal has been recorded
with the high count for the Entrepreneur which is the positive sign for the state itself as well as
the country. This is the reason, in west Bengal is building more small industries for years as
the people of the state shown the capabilities and interest for the for growth of the
entrepreneurship and the industry itself. For this reason, the fund was allotted for West Bengal
is the one and no fund is allotted for the state of Jharkhand. This will show the interest and the
capability of the capital management on the basis of the state(Erasmus, 2010.). The analytical
and interpreted result is shown below which will reflect the analysis of the table show above.
33. 33
Fig-5: Analysis of Sum of Capitals in Eastern Zone states
The above analysis shows the sum of capital allotted for the states on the eastern zone. The
below figure sows the analysis of the total number of companies on the basis of the states.
Fig-6: Analysis of Sum of companies in Eastern Zone states
So, in this section the analysis of ten eastern zone is visualized.
Northern Region
Region State
Sum of Authorized
Capital - Total
Sum of No. of
Companies - Total
NORTHERN
REGION
Chandigarh 9.18 94
Delhi 69.68 768
Haryana 5.65 95
34. 34
Himachal
Pradesh 0.58 20
Jammu &
Kashmir 0 0
Punjab 3.7 119
Rajasthan 5.71 258
Uttar Pradesh 4.47 132
Uttrakhand 0 0
The table shown above demonstrate the status of the startups in the northern region. It ca be
seen that, the highest number of companies are see in the state of (basically U.T) Delhi. There
are 768 so counter startups in Delhi which is the highest count in India also based on the
population and the area. These high counts of the startups, the fund is allotted with high amount
whereas the Uttarakhand have faced the lowest count of startups and eventually there are no
startups in Uttarakhand and the reason behind that is the lack of knowledge of the
entrepreneurship and the wish to build a business. This kind of happening can be seen in those
places where the people are more interested in job and working under someone. In Delhi, as
this is the capital of the country, there are huge number people are there who wan to do business
rather by doing job. So, they choose the way of entrepreneurship through which they can earn
and obviously dedicate the mount to the government and help them to be motivated in the
enhancement of the GDP (Charitou et al., 2006). This GDP of the country, in most cases
depends upon the amount shared by the entrepreneurs and the startups.
The analysis result of the table shown above is defined below:
35. 35
Fig-7: Analysis of Sum of Capitals in Northern Zone states
The analysis shows the outcome of the capital sharing for the states of the northern region and
the below analysis shows the number of startups of the states of the northern region.
Fig-8: Analysis of Sum of companies in Northern Zone states
So, this section is dealing with the analysis for the capital funding and the number of startups
of the northern region.
Southern Region
Region State
Sum of Authorized
Capital - Total
Sum of No. of
Companies - Total
SOUTHERN
REGION
A & N
Islands 0.11 2
Andhra
Pradesh 28.36 542
Karnataka 48.29 625
36. 36
Kerala 18.6 324
Lakshadweep 0 0
Puducherry 1.76 14
Tamil Nadu 87.29 635
The above table shows the analytical outcome for the southern states or the southern region.
Apart from some of the states, all the other states like Tamil Nadu, Kerala, Karnataka and
Andhra Pradesh are mostly forwarded with the entrepreneurship and so they are mostly
encouraged for the startups. With that initiatives, the government are encouraging by providing
necessary funding to those states. Among those states, Tamil Nadu is most progressing and
forward in the field of the startups. So, the high number of startups are found in that state. On
the other hand, Lakshadweep has no count for the start-ups that is the people of there is not so
interested in that field. Fr this reason Tamil Nadu is getting the highest funds in the field of the
entrepreneurship and for the start-ups for which the government will also get back the revenue
for the same. With that comparison, Karnataka is getting lesser amount for the same and this
can be said that, the quality of the start-ups in Tamil Nadu is far better from Karnataka and so
the government is bearing extra amount in Tamil Nadu to get more revenue from the start-ups.
Fig-9: Analysis of Sum of Capitals in Southern Zone states
The analysis is showing the outcome for the capital provision for the state of the southern
region. The below analysis is showing the number of start-ups are there in the states of Southern
region.
37. 37
Fig-10: Analysis of Sum of companies in Southern Zone states
So, this section is dealing with the analysis for the capital funding and the number of startups
of the southern region.
Western Region
Region State
Sum of Authorized
Capital - Total
Sum of No. of
Companies - Total
WESTERN
REGION
Chhatisgarh 0.04 4
Dadar & N.
Haveli 0 0
Daman & Diu 1.76 1
Goa 8.5 71
Gujarat 7.08 222
Madhya Pradesh 18.43 174
Maharashtra 83.9 1329
Thee table above is showing the statics of the startups if the western region. It can be seen that,
Maharashtra has the highest number of startups.
There are 1329 numbers of startups in Maharashtra which is the highest count in this region
also based high population of the state and also for the area. The population matters in this case
as is the population will be higher, the probability of building of the idea for the startups will
be greater but this is not be applicable for those states where the awareness is lesser. Th
awareness of the startups is appreciable and thus the people are interested in it. These high
counts of the startups, the fund is allotted with high amount whereas the Daman & Diu have
faced the lowest count of startups and eventually there is only one startup in Daman & Diu and
38. 38
the reason behind that is the lack of knowledge of the entrepreneurship and the wish to build a
business. This kind of happening can be seen in those places where the people are more
interested in job and working under someone. In Maharashtra, as this is the capital of the
country, there are huge number people are there who want to do business rather by doing job.
So, they choose the way of entrepreneurship through which they can earn and obviously
dedicate the mount to the government and help them to be motivated in the enhancement of the
GDP. This GDP of the country, in most cases depends upon the amount shared by the
entrepreneurs and the startups.
Fig-11: Analysis of Sum of Capitals in Western Zone states
The analysis is showing the outcome for the capital provision for the state of the western region.
The below analysis is showing the number of start-ups are there in the states of western region.
39. 39
Fig-12: Analysis of Sum of companies in Southern Zone states
Capital Management and GDP
Startup India campaign is a good action set up that has intent to market bank finance for the
start-up and their ventures to extend their entrepreneurship and encourage the start-ups with
several creativity of jobs. The startup campaign was initiated by Prime Minister Modi in his
while in the Red Fort on 15th August. The dedication of this on to limit role of the domain of
policy of the States and on the way of elimination of "license raj" and interruptions like in the
permission of land acquisition, proposal for the investment in foreign and the clearance to the
environmental issues. it had been organized by Department of business Policy and Promotion
(DIPP) (Iqbal and Zhuquan. 2015).
To fulfil the operation and the objectives, several measured were taken to feed and boost up
the entrepreneur for the mutual benefits for both the entrepreneurs and the government as well.
Some of the steps weer taken by providing money as loan to the startups so that the startups
can be formed and will not be backtracked for only the money issue. This is done by the
government as for the capital management for India so that the GDP will be higher and will
cross the limit (Kaddumi and Ramadan, 2012).
The Action set up is split across the subsequent areas:
Handholding and the Simplification to work procedure
40. 40
Support the startups with permissible funding and give the opportunities for the
incentives
Initiate the partnership of the academics and the industry for better academic
enthusiasm and education for the need of it.
Main options of Startup Bharat campaign
Introducing mobile application for the clearance of the transaction and doubts also in a
single window
Introducing huge investors for the funding purpose to the startups.
Reduction of the registration fee which is one of the barrier to the startups
Introducing friendly Bankruptcy Code for easy clearance of the payment gateway
Independency of cryptic allocation of money for three years
Independency from financial Tax for three years
Independency from tax in profits for three years
Minimizing long term procedure
Self-certification compliance
Innovation hub beneath Atal Innovation Mission
Focusing on the entrepreneurship education program for the encouragement of the new
entrepreneurs.
New schemes to supply IPR protection to start-ups and new companies
Encourage the entrepreneurship over the nation.
Spreading awareness to the people of India.
Capital Funding
State 2016-2017 2017-2018
Andhra Pradesh 12758.83 14624.21
Arunachal Pradesh 2959.71 3410.48
Assam 12550.78 12039.32
Bihar 31932 29477.21
Chhattisgarh 9313.92 12080.89
Delhi 8752.22 10726.91
Goa 2177.45 3573.75
Gujarat 32892.36 35532.05
Haryana 8853.34 9805.18
Himachal Pradesh 4449.58 4850.93
Jammu & Kashmir 11420.62 11205.44
42. 42
It can be observed that the capital funding is higher in the norther region and the most start
belonging to the state of Uttar Pradesh. So, this will affect on the GDP for the enhancement
and for this issue the funds were granted.
Indian GDP due to Capital Funding
States 2016-2017 2017-2018
Andhra Pradesh 468494 532922
Arunachal Pradesh 14607.36 16389.23
Assam 177745.2 198098
Bihar 317101.3 373919.9
Chhattisgarh 206785.7 236317.8
Delhi 446806.8 494460.3
Goa 42243.45 45547.55
Gujarat 807623.2 895926.7
Haryana 395747.7 441864.3
Himachal Pradesh 94764.16 104368.8
Jammu & Kashmir 97400.31 102680.5
Jharkhand 188566.6 217107.2
Karnataka 818167.2 920061.4
Kerala 465039.8 526774.4
Madhya Pradesh 435789.9 484537.6
Maharashtra 1647506 1792122
Manipur 16198.43 18042.76
Meghalaya 22938.24 24064.99
Mizoram 10293.37 11559.33
Nagaland 16611.85 18414.24
Odisha 277270.7 309807.2
Puducherry 21870.12 24088.57
Punjab 334714.3 368010.9
Rajasthan 549700.6 612194.5
Sikkim 13861.9 15209.33
Tamil Nadu 971089.9 1092564
Telangana 460171.5 522001.1
Tripura 25592.83 29666.62
Uttar Pradesh 944145.7 1043371
Uttarakhand 149816.6 161985.3
West Bengal 706561 800868
The analysis of the data is shown below for the effect of the Capital Funding on the GDP of
India.
43. 43
Fig-14: Capital Funding and GDP
So, it can be said that the eastern region has the highest capability of having the high revenue
generation though the startup that will attract more funds and hence will generate more GDP.
GDP Growth:
States 2014-15 2013-14 2012-13 2011-12
2010-
11
2009-
10
2008-
09
2007-
08
Andhra
Pradesh 532922 468494
410960.
8
379229.
6 319864
27332
7
23738
3
21236
1
Arunachal
Pradesh
16389.2
3
14607.3
6
12546.6
5
11062.6
9 9021 7474 5687 4810
Assam 198098
177745.
2
156864.
2
143174.
9 112688 95975 81074 71076
Bihar
373919.
9
317101.
3
282367.
9 247144 203555
16292
3
14227
9
11368
0
Chhattisgar
h
236317.
8
206785.
7
177511.
3
158073.
8 119420 99364 96972 80255
Delhi
494460.
3
446806.
8
391071.
4
343260.
4 252753
21761
9
18953
3
15794
7
Goa
45547.5
5
42243.4
5
38647.2
9
42252.7
4 33605 29126 25414 19565
45. 45
The outcome of the growth of the GDP with respect to the capital management by the strtaups
is shown below:
Fig-15: GDP Growth by the Indian Startups
Conclusion:
In this analysis, it can be seen that the investment of the government is seem good when
analyzing the GDP of India. In that analysis, the GDP is shown to be increasing with the
incorporation of the startups and hence the more return will be attained by the government. On
the way to achieve the success, the government also organize the awareness program for
encouraging the Indian people to make them highly engaged with the startup business and to
get the revenue back for the goodness on India and it is also seen to be successful on the way
to achieve the capital management of the startups with the help of the interest of entrepreneurs
and the government and with their collaboration.
The study has revealed that there is a great need for the maintenance of a proper type of the
working capital for most of the companies as it can be considered as one of the most important
components for meeting the different day to day activities of the various types of the
companies. The different types of the companies like the Bajaj Auto ltd., MotoCorp has
revealed substantial amount of development in the domain of working capital management.
Cash is a very important component of the working capital management of any company. The
cash is indispensable in managing the different types of the short term liabilities of the
46. 46
companies. It has been seen that in case of some of the companies like the Wipro Ltd., Infosys
Ltd., Tata Consultancy limited were not in a position to manage their funds properly as a result
there was a decrease in the valuation of their stocks to about 2-5% in the recent times. The
significance of this study lies with the different types of the pros and cons that the company
takes in respect to the management of cash that falls under the category of the working capital
management. The management of cash provides a lot of facilities in the efficient management
of the short term payables and the receivables of a company.
If the companies are able to collect the outstanding receivables from their debtors in the proper
time then it can be said that they can definitely have a great advantage over their present
working capital position. But it has been observed in the Indian scenario that in the field of IT
performance of the working capital management is not satisfactory and as a result it has
affected their revenue also. The cash and the inventory management are one of the major issues
that are responsible for the availability of the liquid cash at the proper time for the maintenance
of the short term liabilities of the concerned companies. The short term credit facilities can be
made to the creditors so that they can pay off in the proper time and there is no problem with
the amount of liquidity available in cash in respect to the working capital management.
In respect to the different types of the investors who do invest in short term measures do
generally examine the company in respect to the different types of the goals that are managed
and achieved by the company in the concerned time period. It has also been observed that the
short term financial achievement of a company cannot be a parameter to provide for an accurate
measurement of the working capital management. Of the different types of financial theories
that are applied for the payment of the debtors and the creditors, it can be seen that the amount
of assets can also form a good part of the working capital management of a company, as it can
be a measure and strength of the company to pay off its creditors at the time of crisis or any
form of emergency related to the concerned company.
An analysis and a study of the different types of the credit ratings has been utilized to find out
the liability management capability of an organization. In this study different types of the
theories related to the efficient management of the working capital has also been emphasized
upon. For example in the case of the Miller Orr Cash Management Model it can be observed
that it emphasis on the fact that the managers should have a greater access to the availability of
cash rather than to invest in the different types of the opportunities to invest. The Behavioral
Finance Theory states that the company or the firm should develop its business in such a way
47. 47
that the financial behavior of the concerned company will allure the investors to make their
investments in the concerned company. The Theory of the capital movement is based on the
Hymes market theory of 1960’s, this theory implies on the fact that development of the business
will be based on the different types of economics and the best resources that can be made
available from them and can also help in providing a oligopoly situation that can help the
customers in the long run.
The discussion in the present study has highlighted upon the fact that the current assets and the
liabilities of a company form the best part of the Working Capital management of the concerned
company. It has also been observed that the different types of the ratios can also form an
important and integral part in the working capital management of the companies.
Different types of the techniques were used to collect the data. The data collection was done
on selected sampling with the help of a structured questionnaire and then an SPSS was carried
out to find the regression analysis of the different components and relevancy of the respondents
in respect to the working capital management of the companies. The research was unbiased
and the respondents were allowed a free consent to answer the questions in the questionnaire
for a rational result that can lead to a better understanding of the concerned topic.
The research analysis revealed the following facts.
48. 48
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