This document provides an overview of working capital management at Federal Mogul Corporation. It discusses the company's mission, finance department structure, research methodology, objectives of the study, principles of working capital, classifications of working capital, needs for working capital, determinants of working capital, and management of receivables, creditors, inventory and cash. Key aspects covered include maintaining adequate current assets to meet liabilities, turnover ratios to evaluate liquidity over time, and conclusions regarding the company's satisfactory but improving liquidity position.

1. WORKING CAPITAL
MANAGEMENT
Presented by:
Arshdeep Singh
Roll no. 6805

2. ABOUT FEDERAL MOGUL
Federal-Mogul Corporation is an
innovative and diversified $6.2 billion
global supplier of quality products, trusted
brands and creative solutions to the
automotive, light commercial, heavy-duty
truck, off-highway, agricultural, marine, rail
and industrial markets. The 45,000 work
strength of Federal-Mogul located in 35
countries drive excellence in working.
Company’s globally networked
engineering and technical centers
in the U.S., Europe and Asia
enable to bring customers
breakthrough in advanced technology.

3. MISSION AND VISION OF THE COMPANY
 Mission
“Steadily moving towards leadership with piston
with vision strategy seeing it as the best way to
leaders in business”
 Vision
“To be one of the world’s leading automotive
solutions provider”

4. FINANCE DEPARTMENT
 D.G.M. (Finance), Patiala who is directly
responsible to the Managing Director and Chief
Financial Officer (MD & CFO), one of the most
reputed Functional Department in FEDERAL-MOGUL
GOETZE (INDIA) LTD. DGM manage the
Department and under him there are two
managers, one is Finance Manager and other is
Costing Manager.
 This Department is responsible for handling
transaction relating to purchase of raw material as
well as accounts relating to sales. It is also
concerned with payment of all expenses incurred
by the company like purchase of raw material,
electricity bills, repairs etc.

5. RESEARCH METHODOLOGY
 Primary sources: - Primary data has been collected
through personal discussions with various accounts personal,
various sections of Finance Department, Piston Ring Foundry
Shop and Piston Ring Machine Shop.
 The secondary source: - is related to the use of
material from various books, Annual reports and published
documents of the FEDERAL MOGUL Goetze. It is mainly
based upon office records, Cost-sheets and other published
documents of Goetze (India) Ltd., Bahadurgarh, (Patiala). This
project is basically based on secondary data.

6. OBJECTIVES OF THE STUDY
1. Major objectives:
 To evaluate the working capital position and performance of
Goetze (India) Ltd., Patiala.
 To summarize the large quantities of financial data and to
make qualitative judgment about the firm’s liquidity position.
2. Minor objectives:
 To study the efficiency of Federal-Mogul Goetze (India) Ltd.,
Patiala to manage its working capital.
 To study whether Federal-Mogul Goetze (India) Ltd., Patiala
has adequate funds to finance current assets.
 To study whether the firm can meet its current liabilities in
time.

7. PRINCIPALS OF WORKING CAPITAL
 Working capital polices of a firm have a great
effection its profitability, liquidity and structural
health of the organization. In this context, Working
capital management three Dimensional in nature.
 Dimension I is concerned with the formulation of the
policies with regard to profitability, risk and liquidity.
 Dimension II is concerned with the decisions about
the composition and level of current assets.
 Dimension III is concerned with the decisions about
the composition and level of current liabilities.

8. CLASSIFICATION OF WORKING CAPITAL
1. ON THE BASIS OF CONCEPT
• It refers to firm’s investments in
current assets. Thus gross
working capital includes the total
current assets Gross working
capital
• It refers to difference between
current assets and current
liabilities. i.e.
• NWC= current assets – current
liabilities
Net working capital

9. CONTINUED….
2. ON THE BASIS OF TIME
• It is the minimum amount, which
is to insure effective utilization of
fixed facilities and for maintaining
the circulation of current assets. Permanent
working capital
• Temporary working capital is
amount of working capital, which
is required to meet the seasonal
demands and some special
exigencies.
Temporary working
capital

10. NEED OF WORKING CAPITAL
Working capital is needed for the following purpose:
 For the purchase of raw material, components and
spare.
 To pay wages and salaries
 To incur day to day expenses and overhead costs
such as fuel, power and office expenses, etc.
 To meet the selling cost as packing advertising etc.
 To provide credit facilities to the costumers.
 To maintain the inventories of the raw material,
work in progress, stores and spares and finished
goods.

11. DETERMINANTS OF WORKING CAPITAL
 Nature and size of business
 Manufacturing cycle
 Sales growth
 Price level changes
 Operating efficiency and performance
 Market condition
 Production policy
 Rate of stock turnover
 Credit policy

12. RECEIVABLE MANAGEMENT
In this unit, there is no receivable management, as all the
sales are controlled and the head office situated at
Faridabad receives payments. To boost up the sales,
the company pays an attractive cash discount to its
customers for early payments so that the credit
collection period is decreased. The credit worthiness of
the customer is compared with the credit standards of
the company.
Receivable management involves the careful
consideration of the following aspects:
 Forming the credit policy
 Executing the credit policy
 Collection efforts

13. FORMING CREDIT POLICY
For efficient management of receivables, a concern must
adopt a credit policy. A credit policy is related to decisions
such as credit standards, length of credit period, cash
discount etc.
 Credit standards
 Length of credit period
 Cash discount

14. EXECUTING CREDIT POLICY
After formulating the credit policy, its proper execution is very
important. The evaluation of credit applications and finding out
the credit worthiness of customers should be undertaken.
 Collecting credit information
 Credit analysis
 Credit decision

15. COLLECTION EFFORTS
 Every firm should follow a well-laid down collection
policy that may be lenient or strict, and procedure to
collect dues from its customers. When the normal credit
period granted to a customer is over, and he has not
made the payment, the firm should send a polite letter to
him reminding that the account is overdue. If the
customer does not respond, the firm may send
progressively strong-worded letters. If receivables still
remain uncollected, telephone, telegram and personal
visit of the firm’s representative may follow letters. If the
payment is still not made, the firm may initiate a legal
action against the customer.

16. CREDITORS MANAGEMENT
Particulars 2007-08 2008-09 2009-10 2010-11
Creditors to current
liabilities
92% 90% 89% 69%
Creditors turnover
ratio
4.02times 1.95 times 3.69 times 2.23 times
Average payment
period
90 days 123 days 98days 134days

17. INVENTORY MANAGEMENT
Particulars 2007-2008 2008-09 2009-2010 2010-2011
Inventory to
current
assests
87.28% 93.09% 91.06% 65.39%
Inventory
turnover
ratio
7.60times 4.95 times 4.40 times 3.30 times
Days of
inventory
holding
40 61 69 29

18. CASH MANAGEMENT
2007-08 2008-09 2009-10 2010-11
1. Cash to
current
assets
0.65% 0.10% 0.08% 1.06%
2. Cash ratio 1.5% 0.25% 0.23% 2.47%

19. ANALYSIS OF OVERALL LIQUIDITY POSITION
Ratio 2007-08 2008-09 2009-10 2010-11
1.Current
Ratio
2.33 2.56 2.82 2.32
2.Acid test
ratio
0.29 0.18 0.14 0.47
3. W.C
turnover ratio
11.63 7.58 5.91 3.8

20. LIMITATIONS OF THE STUDY
 Working capital management is so wide topic however to cover
all these would affect the depth and quality of the study.
 Time period for summer training was just four weeks .It was
very short period for collecting the information.
 The balance for the year 2012 was not finalized till the date of
preparing project report. So some approximate figs. have been
taken.
 Some items of the information are not available in the
published annual reports, for the purpose of analysis.
 Data available in financial reports is not sufficient and the in-depth
data for the group as a whole is not available at Patiala
Plant.

21. CONCLUSION
 On the basis of above position of FM goetze (India) ltd.,
Patiala. It can be concluded that if we consider according to
rule of thumb then liquidity position of the unit appears to be
unsatisfactory because cash balance of the unit is very small.
But, according the management of the concern, the present
cash balance is sufficient for the firm’s operations.
 The company has adopted incremental approach for the
preparation of its budgets. Such approach carries forward
previous year’s inefficiences and it does not require managers
to review their past activities. so, the firm may use zero base
budgeting for better management.