This is my final Summer Internship PPT on the topic Working Capital Finance to MSMEs at The Jammu and Kashmir Bank Limited, Gangyal, Jammu City.

1. Summer Training Project
On
Working Capital Finance to
MSMEs
Presented by:
Abilash Kumar Bhagat
8401
Department of Management Studies

2. Contents:
• Introduction.
• Genesis.
• Need.
• Literature Review.
• Objectives.
• Research Methodology.
• Outcomes.
• Findings.
• Conclusion.

3. The Jammu and Kashmir Bank Limited:

4. Introduction:
• Pravez Ahmad is the Chairman and CEO.
• Headquarters is in Srinagar near TRC (Tourist Reception Centre).
• It has a network of around 910 bank branches and 1126 ATMs across the
country.
• Net Interest Income of ₹ 2511.94 Cr. for the FY 2016-17.
• For the quarter ended 30-06-2017, Interest Income of ₹ 1207.21 Cr., up 4.53 %
from last quarter Interest Income of ₹ 1154.87 Cr. and down -2.71 % from last
year same quarter Interest Income of ₹ 1240.86 Cr. The bank has reported net
profit after tax of ₹ 30.19 Cr. in latest quarter.
• Interest Income for the month July : ₹ 2.75 Cr. (For one Particular Branch).

5. Genesis of the J & K Bank:
• J&K Bank was incorporated in 1st Oct., 1938 and commenced its business in 4th
July, 1939 in Kashmir.
• Founded by Maharaja Hari Singh and invited the eminent investors.
• It was the first in the country and which initially as a semi-state owned bank.
• In year 1971, the bank had acquired the status of a Scheduled Bank.
• Sole Banker to the government of Jammu & Kashmir.
• P1+ rating from Credit Rating Information Services of India (CRISIL).
• A corporate agent of MetLife India Insurance Company.

6. Need for Study:
• The study has been conducted by me at “The Jammu and Kashmir Bank Limited”
for gaining practical knowledge about the Working Capital and their activities
conducted by Bank. Bank make profit for providing loans to the enterprises and
reverse charge higher rate of interest and working capital finance is one of the
product of the bank. So, that why they assigned me this Project.

7. Literature Review:
Working capital is the fund invested in current assets and is needed for meeting
day-to-day expenses. Working capital financing is a specialized area and is designed
to meet the working requirements of a business. The amount approved by the bank
for the firm’s working capital requirement is called cash credit limit.
• Bogen, J. I., (1948) considered that working capital is the total of current assets of
an enterprise which circulates from one form to another, for instance, from cash
to inventories, from inventories to receivables and from receivables to back into
cash.
• Park, C. and Gladson, J. W., (1963), they defined working capital as the excess of
current assets of business (cash, accounts receivables, inventories) over current
items owned to employees and others (salaries, wages, accounts payables, taxes
owned to government).

8. Cont’d:
• Meade, N & Gormley , F. (2006), they found that working capital needs of a
particular business are likely to change over time as a result of change in the
commercial environment.
• InfoDev, (2006) argued that in place to working capital finance from the bank,
Bootstrapping is more prefer, i.e., making use of savings, investments from
friends and family and retained earnings, is by far the most common strategy
used by successful technology companies.
• Reema Srivastava, Research Scholar, Faculty of Commerce, B.H.U., Varanasi, the
working capital is the finance required to meet the costs involved during the
operating cycle or business cycle.

9. Cont’d:
• Working capital finance is good for every industry. During my training, I found
that cash credit occupies an important place in financing working capital
requirements of industries. Bank finance for meeting working capital needs is
easily available to firms. Working capital is linked with both the liquidity and
profitability of a company.

10. Objectives:
• To analyze the process of the Working Capital Finance.
• To analyze the Liquidity position through various Working Capital Finance
related Ratios.
• To analyze the Working Capital components such as Accounts Receivable and
Cash Management.

11. List of Tasks Assigned:
• Initially Checked all the files.
• Check their recent Annual Reports.
• Check all Documents and read them.
• Analyze their Balance Sheets, Profit and Loss Accounts.
• Make their Financial Appraisals.
• Make Renewal for the Enhancement Cash Credit Limits.

12. Research Methodology:
• This is a way to systematically solve the Research Problem. The methodology is
Exploratory in nature as the study is to gain new insights in ‘Working Capital
Finance’.
• After Identifying the problem, Analytical Research is used.
• All the important components of Working Capital have been analyzed in detail.

13. Sources of Data:
• Secondary Data: This data which is already collected and easily get form the
sources. It saves the time, money and efforts to collect the data.

14. Sampling Design:
• Sampling Unit : Financial Statements.
• Sampling Size : Five years Final Accounts.
• Tool Used for Calculations : MS-Excel.

15. Tools for Analyzing Data:
• Stock Statements.
• Ratio Analysis.
• Financial Statements.
• Trend Analysis.
• Renewal Reports.

16. Working Capital Finance:
• Working Capital Finance is a financial metric which represents operating liquidity
available to a business.
• The goal of working capital management is to ensure that the firm is able to
continue its operations and that it has sufficient cash flow to satisfy both
maturing short-term debt and upcoming operational expenses.
• Working capital refers to the cash a business requires for day-to-day operations
or more specifically, for financing the conversion of raw material into finish
goods.
• Current assets are include cash short term securities, bills receivables, debtors,
and stock. Current liabilities are include creditors, bills payable, and outstanding
expenses.
• Working Capital= Current Asset – Current Liability

17. Process for a Proposal of Working Capital
Finance:

18. Industries:
• Jagdembey Enterprises.
• D. K. Thread Industries.
• Ohrisons Industries.

19. Net Operating Cycle:
• Net Operating Cycle involves determining how long it takes to create inventory,
sell inventory and collect on invoices to customers.
• Net Operating Cycle = Gross Operating – Creditors Period.
• Gross Operating Cycle = Stock Period + Debtors Period.
• Stock Period = Raw Material consumption Period + Work in Progress
consumption Period + Finish Goods consumption Period.

20. Cont’d:
• Working Capital = Current Assets – Current Liabilities.
• Current Ratio = Current Assets/Current Liabilities.
• Interest Coverage Ratio = Earning before Interest and Tax/Interest Expenses.

21. Jagdembey Enterprises:
• Cash Credit Limit: Rs. 3 Lacs.
• Dealing with Branch since 2001.
• Rate of Interest: 11.50%.

22. Net Operating Cycle:
Years Stock Period Debtors
Period
Creditors
Period
Days
2014-15 175 3 92 86
2015-16 157 3 71 89
2016-17 170 2 66 105
2017-18 155 14 76 92
2018-19 159 23 70 112

23. Working Capital:
Years Current Assets Current
Liabilities
Working Capital
2014-15 31.93 19.36 12.57
2015-16 33.75 18.05 15.70
2016-17 33.80 15.89 17.91
2017-18 35.95 19.10 16.85
2018-19 39.28 17.96 21.32

24. Interpretation:
• This ratio represents that part of the long term funds represented by the net
worth and long term debt, which are permanently blocked in the current assets.
• It is in increasing double, than year by year because of assets increasing fast than
Liabilities.

25. Current Ratio:
Years Current Assets Current
Liabilities
Current Ratio
2014-15 31.93 19.36 1.65
2015-16 33.75 18.05 1.87
2016-17 33.80 15.89 2.13
2017-18 35.95 19.10 1.88
2018-19 39.28 17.96 2.19

26. Interpretation:
• Current ratio indicates the availability of funds to payment of current liabilities in
the form of current assets.
• A higher ratio indicates that there were sufficient assets available with the
organization which can be converted in cash, without any reduction in the value.
As ideal current ratio is 2:1, where current ratio of the firm is more than 2:1, it
indicates the unnecessarily investment in the current assets in the form of debtor
and cash balance.
• Ratio will higher in the year 2018-19 where cash balance is more than
requirement which came through encashment of deposits of funds.

27. Interest Coverage Ratio:
Years EBIT Interest
Expenses
Interest
Coverage Ratio
2014-15 4.07 13.98 29.11
2015-16 6.21 16.29 38.12
2016-17 3.95 18.32 21.56
2017-18 7.20 18.08 39.82
2018-19 7.50 22.38 33.51

28. Interpretation:
• In the year 2017-18, Industry will much debt compare to EBIT so interest
coverage ratio is high.
• But in 2017-18, Enterprise will increasing its external debt so company have pay
more interest among its earnings so interest coverage ratio falling down compare
to next forecasting years and previous years.

29. D. K. Thread Industries:
• Cash Credit Limit: Rs. 14 Lacs.
• Dealing with Branch since 2014.
• Rate of Interest: 12.40%.

30. Net Operating Cycle:
Years Stock Period Debtors
Period
Creditors
Period
Days
2014-15 168 58 46 179
2015-16 238 29 9 258
2016-17 362 34 35 361
2017-18 251 77 0 329
2018-19 242 87 0 328

31. Working Capital:
Years Current Assets Current
Liabilities
Working Capital
2014-15 74.71 9.19 65.52
2015-16 83.82 12.61 71.21
2016-17 70.23 15.53 54.70
2017-18 79.11 17.75 61.36
2018-19 87.09 18.00 69.09

32. Interpretation:
• This ratio represents that part of the long term funds represented by the net
worth and long term debt, which are permanently blocked in the current assets.
• It is in increasing double, than year by year because of assets increasing fast than
Liabilities.

33. Current Ratio:
Years Current Assets Current
Liabilities
Current Ratio
2014-15 74.71 9.19 8.13
2015-16 83.82 12.61 6.65
2016-17 70.23 15.53 4.52
2017-18 79.11 17.75 4.46
2018-19 87.09 18.00 4.84

34. Interpretation:
• Current ratio indicates the availability of funds to payment of current liabilities in
the form of current assets.
• A higher ratio indicates that there were sufficient assets available with the
organization which can be converted in cash, without any reduction in the value.
As ideal current ratio is 2:1, where current ratio of the firm is more than 2:1, it
indicates the unnecessarily investment in the current assets in the form of debtor
and cash balance.
• Ratio will higher in the year 2018-19 where cash balance is more than
requirement which came through encashment of deposits of funds.

35. Interest Coverage Ratio:
Years EBIT Interest
Expenses
Interest
Coverage Ratio
2014-15 8.25 62.20 5.38
2015-16 7.65 65.67 4.67
2016-17 6.60 69.30 4.30
2017-18 9.31 75.61 5.69
2018-19 11.02 83.39 6.62

36. Interpretation:
• In the year 2017-18, Industry will much debt compare to EBIT so interest
coverage ratio is high.
• But in 2017-18, Industry will increasing its external debt so company have pay
more interest among its earnings so interest coverage ratio falling down compare
to previous years.
• But in the forecasting year 2018-19, Industry will increase its external debt.

37. Ohrisons Industries:
• Cash Credit Limit: Rs. 55 Lacs, But Renewal cum Enhancement proposal for
enhancing cash credit limit up to Rs. 75 Lacs.
• Dealing with Branch since 1994.
• Rate of Interest: 10.30%.

38. Net Operating Cycle:
Years Stock Period Debtors
Period
Creditors
Period
Days
2014-15 136 59 7 188
2015-16 80 54 11 124
2016-17 46 54 20 80
2017-18 130 81 80 131
2018-19 169 99 133 135

39. Working Capital:
Years Current Assets Current
Liabilities
Working Capital
2014-15 74.87 36.79 38.08
2015-16 65.96 32.61 33.35
2016-17 86.48 49.73 36.75
2017-18 181.67 125.07 56.60
2018-19 229.58 150.25 79.33

40. Interpretation:
• This ratio represents that part of the long term funds represented by the net
worth and long term debt, which are permanently blocked in the current assets.
• It is in increasing double, than year by year because of assets increasing fast than
Liabilities.

41. Current Ratio:
Years Current Assets Current
Liabilities
Current Ratio
2014-15 74.87 36.79 2.04
2015-16 65.96 32.61 2.02
2016-17 86.48 49.73 1.74
2017-18 181.67 125.07 1.45
2018-19 229.58 150.25 1.53

42. Interpretation:
• Current ratio indicates the availability of funds to payment of current liabilities in
the form of current assets.
• A higher ratio indicates that there were sufficient assets available with the
organization which can be converted in cash, without any reduction in the value.
As ideal current ratio is 2:1, where current ratio of the firm is more than 2:1, it
indicates the unnecessarily investment in the current assets in the form of debtor
and cash balance.
• Ratio will higher in the year 2018-19 where cash balance is more than
requirement which came through encashment of deposits of funds.
• Here ratio will increase as a increasing rate from 2017 to 2019.

43. Interest Coverage Ratio:
Years EBIT Interest
Expenses
Interest
Coverage Ratio
2014-15 0.33 53.62 1.44
2015-16 0.71 55.02 1.17
2016-17 4.37 72.26 1.16
2017-18 7.71 88.67 1.74
2018-19 11.13 108.36 1.89

44. Interpretation:
• In the year 2017-18, Industry will much debt compare to EBIT so interest
coverage ratio is high.
• But in 2017-18, Industry will increasing its external debt so company have pay
more interest among its earnings so interest coverage ratio falling down compare
to previous years.

45. Its Outcomes:
• Effect on the Working Capital profitability.
• Enhancing the cash credit limit.
• The company is moving forward with excellent.

46. Findings of the Study:
• Working capital finance of “Jagdembey Enterprises, D. K. Thread Industries and
Ohrisons Industries” was increasing and showing positive working capital finance
per year with current ratios is i.e. 2.13, 4.52 and 1.74 respectively.
• Working capital of the company was increasing and showing positive working
capital every year. It shows good liquidity position. It increased because of
increment in the current assets is more than increase in the current liabilities.
• Working Capital shows good liquidity position. It indicates that company has the
ability of payments of short terms liabilities.

47. Scope of the Study:
• The scope of the study is identified after and during the study is conducted. The
main scope of the study was to put into practical the theoretical aspect of the
study into real life work experience. The study of working capital finance is based
on tools like Ratio Analysis, stock statements, Statement of changes in working
capital finance and cash credit limits. Further the study is based on 5 years Five
years Final Accounts of Jagdembey Enterprises, D. K. Thread Industries and
Ohrisons Industries.

48. Conclusion:
• The study on working capital finance conducted in “Jammu and Kashmir Bank”
to analyze the financial position of the enterprises. The enterprises financial
position is analyzed by using the tool of annual reports from 2015-16 to 2018-19.
• According to this Research, the overall liquidity positions of all the industries is
good. The industries achieve sufficient profits in past 2 years, on the basis of their
past position, the company will approve their cash credit limit enhancement
renewals. Due to their good position in the market, this shows that their solvency
is good. They maintain low liquidity to achieve high profitability. Working capital
increased because of increment in the current assets is more than increase in the
current liabilities. Though the company’s sale is continuously rising but the net
profit is not so much increased so management should take some steps to
decrease its expenses.
• In the last year, the inventory turnover has increased; this is good sign for the
company. On the whole, the company is moving forward with excellent.

49. Limitations of the Study:
• The study duration time is short.
• The analysis of five years of data study (from year 2015 to year 2019) for financial
analysis is more complex with their Balance Sheets, Profit and Loss Accounts and
Cash Flow Accounts.

50. Thank You