Working Capital Management


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Working Capital Management

  1. 1. Company Guide: Faculty Guide:Mr. Bibhuti Bhusana Nayak Mr. Dipti Ranjan Sarangi A.G.M. (Prof. of AMITY) (corporate finance) Presented By: Arpan Ghosh MBA-3rd Sem Amity Global Business School
  2. 2. "Finance is the art of passing currency from hand to hand until it finally disappears."- Robert W. Sarnoff
  3. 3. ORISSA POWER TRANSMISSION CORPORATION LIMITED(OPTCL), one of the largest Transmission Utility in the countrywas incorporated in March 2004 under the Companies Act, 1956 as acompany wholly owned by the Government of Orissa to undertakethe business of Transmission and wheeling of electricity in the State. Started commercial operation from 01.04.2005 only as a Transmission Licensee.The registered office of the Company is situated at Bhubaneswar, inState of Orissa. OPTCL became fully operational with effect from 9thJune 2005.
  4. 4.  Working Capital:- Working Capital are those capital which is required or used to meet day to day expenses or financing of short term or current asset it is called Working capital. Concepts of Working Capital:-1. Gross Working Capital:- It includes all current asset invested in business enterprise.2. Net Working Capital:- It means Current Asset – Current Liabilities. Working Capital Management:- The management of current assets, current liabilities and inter-relationship between them is termed as working capital management. It also include cash management, Receivable Management and Inventory Management.
  5. 5.  To study the various components of working capital. To analyze the liquidity trend. To analyze the working capital trend. To appraise the utilization of current asset and current liabilities and find out short-comings if any. To suggest measure for effective management of working capital.
  6. 6. The following are the literature review by different authors anddifferent research scholars on Working Capital Management:- Hardcastle J (2009)., says that “Working capital, sometimes called gross working capital”. Thachappilly G (2009)., says that “Working Capital Management Manages Flow of Funds”. Dubey R (2008)., says that “The working capital in a firm generally arises out of four basic factors like sales volume, technological changes, seasonal , cyclical changes and policies of the firm”.
  7. 7. Research methodology is a systematic approach in managingresearch to achieve pre-defined objectives. It helps a researcher toguide during the course of research work. It include:- Selection Of Topic:- After due consultation with the External guide & Internal guide, the topic was finalized and titled as “A STUDY ON WORKING CAPITAL MANAGEMENT”. Selection Of Location For The Study:- The location for study was selected as the corporate office of OPTCL, Bhubaneswar. Sources Of Data Collection:-This project is based on secondary data collected from Annual report of OPTCL 2008-2009, 2009-2010 & 2010- 2011.
  8. 8.  STATISTICAL TOOLS USED FOR DATA ANAYLSIS The various statistical tools used for data analysis is as follows:- a) Tables b) Bar-chart c) Graphs d) Correlation ANALYTICAL TOOLS USEDThe analytical tools used for data analysis is as follows:- a) Ratio analysis b) Schedule of change in working capital c) Cash flow statements
  9. 9.  The first sections explain about the various components of working capital, variable of working capital. The second section explains about the liquidity trend of the organization. The third section explains about the working capital trend. The fourth section explains the utilization of current assets and current liabilities. The fifth section explains the measure to effective management of working capital.
  10. 10.  Working capital of three years i.e., (2008-2009, 2009-2010and 2010-2011) is in negative figure. The reason is that the company’s current liabilities exceeds current assets. The standard current ratio is 2:1. And for OPTCL it is not satisfactory. The reason behind such result is that the current liabilities exceed current assets. Debtors of the company were high; they were increasing year by year, so more funds were blocked in debtor. The firm is facing difficulty in paying short-term debt. The firm is not properly managing the sundry debtor.
  11. 11.  From the above study ,it is easy to conclude that working capital is the lifeline of any organization. To stay healthy ,to stay in business and to grow, it requires a strong working capital management plan. OPTCL is the soul of Orissa’s power transmission plays a pivotal role in making power transmission through out the state. For improvement of organization’s profitability, OPTCL need to improve the working capital management system by decreasing the current liabilities through reducing of over head expenses. Company should give more attention on increasing its collection of revenue from wheeling of power. Management should focus on shortening its average collection period by changing its credit terms and conditions.