WORKING CAPITAL MANAGEMENT AT ELEGANT CREATION

WORKING CAPITAL MANAGEMENT IN
ELEGANT CREATION PVT LTD.
A SUMMER INTERNSHIP REPORT
Submitted by
BABLOO KUMAR
Registration no: 11608096
In partial fulfillment of Summer Internship for the award of the degree of
BACHELOR OF COMMERCE (HONS)
Mittal School of Business
LOVELY PROFESSIONAL UNIVERSITY
Phagwara, Punjab
July, 2018

ACKNOWLEDGEMENT
Whatever we do and whatever we achieve during the course of our limited life is just
not done only by our own efforts, but by efforts contributed by other people
associated with us directly or indirectly. Words are indeed inadequate to convey my
deep sense of gratitude to all those who have helped me in completing this summer
project to the best of my ability. Being a part of this project has certainly been a
unique and a very productive experience.
I sincerely thank Mr. Manish Choudhary (Coo), person of amiable personality, for
assigning such a helping project work which has enriched my work experience and
getting me acclimatized in a fit and final working ambience in the premises Elegant
Creation.
I acknowledge my gratitude to Amit Kumar Sharma (Lovely Professional University)
my mentor, for making all kinds of arrangements to carry the project successfully and
for guiding and helping me to solve all kinds of queries regarding the project work.
Her systematic way of working and incomparable guidance has inspired the pace of
the project to a great extent.
Last but not least I would like to thank all the employees of Elegant Creation specially
Mr. Raushan Ray (Production, Manger), Mr. Ashish Chauragade (manager-quality
control) and my friends for their cooperation, valuable information and feedback
during my project.
Babloo kumar
Reg:11608096
B.com (hons)

Abstract
The project on Working Capital Management has been a very good experience. Every
manufacturing company faces the problem of Working capital management in their
day-to-day operations. An organization’s cost can be reduced and profits can be
increased only if it is able to manage its working capital efficiently and at the same
time, the company can provide customer satisfaction and can hence improve their
overall productivity and profitability.
The project undertaken is on-WORKING CAPITAL MANAGEMENT ELEGANT
CREATION PVT LTD. The project focused on making a financial overview of the
company by conducting a Working capital analysis of Elegant creation for the years
2017-2018 and ratios affecting working capital and various components of Working
capital.
It describes about how the company manages its working capital and the various
steps that are required in the management of working capital. Cash is the lifeline of a
company. If this lifeline deteriorates, so does the company's ability to fund operations,
reinvest and meet capital requirements and payments. Understanding a company's
cash flow health is essential to making investment decisions. A good way to judge a
company's cash flow prospects is to look at its working capital management (WCM).
Working capital refers to the cash a business requires for day-to-day operations or,
more specifically, for financing the conversion of raw materials into finished goods,
which the company sells for payment. The working capital is an important yardstick
to measure the company’s operational and financial efficiency. Any company should
have a right amount of cash and lines of credit for its business needs at all times. This
project also describes about the requirement of working capital in Elegant Creation
Pvt. Ltd

CONTENT
1. CAPTER NO. 1………….………………………………………………..……7-16
1.1. INTRODUCTION…………………………………………………………..…..7
1.2.INTRODUCTION TO ELEGANT CEATIONS PVT. LTD………………..…..7
1.3.INTERNATIONAL BUSINESS ……………………………………………..…8
1.4.VISION, MISSION AND VALUES …………………………………………....8
1.5.CONTRIBUTATION OF ELEGANT IN VARIOUS SECTOR………………..9
1.6.ELEGANT PRODUCT …………………………………………………….10-13
1.7.STRATEGIC CHALLENGES …………………………………………….…..14
1.8.CRITICAL SUCCESS FACTOR……………………………………………...14
1.9.SWOT ANALYSIS…………………………………………………………….15
1.9.1. STRENGTH ………………………………………………………………15
1.9.2. WEAKNESS………………………………………………………………15
1.9.3. OPPORTUNITY ………………………………………………………….15
1.9.4. THREATS ………………………………………………………………..15
1.10. TIME LINE OF THE STUDY ……………………..……………………...…16
1.10.1. OBJECTIVE OF STUDY…………………………………………..………16
1.10.2. SCOPE OF STUDY ……………………………………………………..…16
2. WORKING CAPITAL ……………………………………………………………17
2.1. MEANING……………………………………………………………………...17
2.2. DEFINITION …………………………………………….…………….…..…..17
2.3.CALCIFICATION OF WORKING CAPITAL ON THE BASIS OF CONCEPT17
2.4. NEED OF WORKING CAPITAL ……………………….……………..………18
2.5. NATURE OF WORKING CAPITAL ………………………………………18-19
2.6. SOURCES OF WORKING CAPITAL …………………………………………19
2.7. IMPORTANCE OF WORKING CAPITAL ……………………………………20
2.8. FACTOR AFFECTING WORKING CAPITAL ……………………………20-23
2.9. WORKING CAPITAL MANAGEMENT ……………………………………...23
2.9.1. INTRODUCTION …………………………………………………………….23
2.9.2. MEANING…………………………………………………………………….23
2.9.3. OBJECTIVE …………………………………………………………………..23
2.9.4. ADVANTAGES ………………………………………………………………24
2.9.5. DISADVANTAGES ………………………………………………………….24
3. LITERATURE REVIEW ……………………………………………………..25-26
4. RESEARCH METHODOLOGY …………………………………………………27
4.1. TIME PERIOD OF STUDY…………………………………………………….27
4.2. TYPE OF RESEARCH …………………………………………………………27
4.3. DATA SOURCES …………………………………………………..………27-28
5. DATA ANALYSIS AND INTERPRETATION …………………………………29
5.1. RECEIVABLES MANAGEMENT ...…………………………………………..29
5.1.1. INTRODUCTION ……………………………………………………….……29
5.1.2. MEANING ……………………………………………………………………29
5.1.3. PURPOSE OF RECEIVABLES ……………………………………………...29

5.1.4. FACTOR AFFECTING THE SIZE OF RECEIVABLES ……………………29
5.1.5. RECEIVABLES MANAGEMENT ………………………………………..…29
5.1.6. RECEIVABLE MANAGEMENT AND RATIO ………………………….…30
5.1.7. DEBTOR TURNOVER RATIO ……………………………………….....30-31
5.1.8. DEBT COLLECTION PERIOD …………………………………………..32-33
5.2. INVENTORY MANAGEMENT ……………………………………………….34
5.2.1. INTRODUCTION……………………………………………………………..34
5.2.2. NEED TO HOLD INVENTORY ……………………………………………..34
5.2.3. INVENTORY MANAGEMENT TECHNIQUE……………………………...35
5.2.4 INVENTORY TURNOVER RATIO ……………………………………...36-37
5.2.5. INVENTORY HOLDING PERIOD ………………………………………….38
5.3. CASH MANAGEMENT ……………………………………………………….39
5.3.1. INTRODUCTION …………………………………………………………….39
5.3.2. MEANING OF CASH ………………………………………………………..39
5.3.3. OBJECTIVE OF CASH MANAGEMENT …………………………………..39
5.3.4. BASIC PROBLEM IN CASH MANAGEMENT ……………………………39
5.3.5. SAFETY LEVEL OF CASH …………………………………………………39
5.3.6. CRITERIA FOR INVESTMENT IN SURPLUS …………………………39-40
5.3.7. CASH RATIO ……………………………………………………………..40-41
5.3.8. CASH TO CURRENT ASSETS RATIO …………………………………42-43
5.4. ANALYSIS OF VARIOUS COMMENTS OF WORKING CAPITAL ……44-45
5.5. WORKING CAPITAL ……………………………………………………...45-46
5.6. WORKING CAPITAL TURNOVER RATIO ……………………………...46-47
5.7. ANALYSIS OF LIQUID POSITION …………………………………………..48
5.7.1. CURRENT RATIO ……………………………………………………….48-49
5.7.2. QUICK RATIO ……………………………………………………………50-51
5.8. ANALYSIS OF PROFITABILITY ………………………………………….…52
5.8.1. NET PROFIT RATIO ……………………………………………………..52.53
6. FINDING ……………………………………………………………………...54-55
7. SUGGESTION AND CONCLUSION……………………………………………56
8. REFERENCE ……………………………………………………………………..57

LIST OF TABLE AND GRAPH
TABLE NO: PAGE NO
1. STATEMENT SHOWING DEBTOR TURNOVER RATIO……………….30
2. STATEMENT SHOWING DEBT COLLECTION PERIOD ………………31
3. STATEMENT SHOWING INENTORY TURNOVER RATIO ……………33
4. STATEMENT SHOWING INVENTORY HOLDING PERIOD …………..38
5. STATEMENT SHOWING CASH RATIO …………………………………40
6. STATEMENT SHOWING CASH TO CURRENT ASSET RATIO………..42
7. ANAYLSIS OF VARIOUS COMPENTS OF WORKING CAPITAL ……..43
8. STATEMENT SHOWING WORKING CAPITAL ………………………...45
9. STATEMENT SHOWING WORKING CAPITAL TURNOVER RATIO ...46
10. STATEMENT SHOWING CURRENT RATIO ……………………………48
11. STATEMENT SHOWING QUICK RATIO ………………………………..50
12. ANAYLSIS OF NET PROFIT RATIO ……………………………………..52
GRAPH NO: PAGE NO:
1. DEBTOR TURNOVER RATIO …………………………………………….30
2. DEBT COLLECTION PERIOD……………………………………………..32
3. INVENTRY TURNOVER RATIO …………………………………………37
4. INVENTRY HOLDING PERIOD ………………………………………….38
5. CASH RATIO ……………………………………………………………….41
6. CURRENT ASSESTS RATIO ……………………………………………...42
7. COMPONENTS OF WORKING CAPITAL ……………………………….44
8. WORKING CAPITAL ………………………………………………………45
9. WORKING CAPITAL TURNOVER RATIO ………………………………47
10. CURRENT RATIO ………………………………………………………….49
11. LUQUID RATIO …………………………………………………………....51
12. NET PROFIT RATIO ……………………………………………………….53

1. INTRODUCTION
1.1 INTRODUCTION TO ELEGANT CREATION PVT. LTD
Elegant Creations Pvt. Ltd. is a dynamic young Company characterized by a strong
team of industry professionals with deep domain knowledge and experience in the
design and development of a variety of industrial equipment.
Elegant Creations is an foresighted and innovative manufacturer of mechanical
equipments such as heavy duty hydraulically operated equipments for HR/CR Mills,
Saw Pipe Plants, Slitting Lines, Pickling Lines, 4HI Rolling Mills Cut to length lines,
Flattener and Preparatory equipments for solvent Extraction Plants, and more.
In addition Elegant Creations also provides services like job works related to CNC
Machine Jobs, Machine Building, Development, and more. In a relatively short period
of time Elegant Creations has gained a reputation for excellence in our products and
services; thus earning us the valuable trust of our clients – some of the major
companies both in the public and the private sector.
ELEGANT HAS:
 LAND: 12, 000 Sq. Meters + 18,000 Sq. Meters
 PRODUCTION, R&D, DESIGN, QUALITY CONTROL & STORES
BUILDING: 12 Meter x 36 Meter (Double story)- 768 Sq. Mtr
 ADMINISTRATION & CANTEEN BUILDING: 10 Meter x 40 Meter
(Double Story)- 670 Sq. Mtr
 ALL SHEDS EQUIPPED WITH FOLLOWING LIFTING FACILITY:
1. Overhead Crane, ABUS make, 14Mtr Span, 20 MT
2. Overhead Crane, ABUS make, 14Mtr Span, 10 MT
3. Overhead Crane, Weisserth-Hieber make, 11.6Mtr Span, 12.5 MT
4. Overhead Crane, DEMAG make, 11.6Mtr Span, 7.5 MT
5. Column Crane, SASCHE-DEMAG, 4Mtr Span, 2 MT
 UPCOMING PROJECTS:
1. Honned Tube Manufacturing Unit - Bore Dia450mm x 8500mm Length
2. Roll Manufacturing Unit - Dia 600mm(Max) x 5000mm Total Length

1.2 INTERNATIONAL BUSINESS
Over the years it has established its references in overall 15 countries of the world.
These references have covered heavy duty hydraulically operated equipments for
HR/CR Mills, Saw Pipe Plants, Slitting Lines, Pickling Lines, 4HI Rolling Mills Cut
to length lines, Flattener and Preparatory equipments for solvent Extraction Plants,
and more. ELEGANT has gained the experience of working with world renowned
consulting organization and inspection agencies through implementation of these
overseas projects.
Thus we can say that company is very much successful in meeting the demands of
international markets in terms of technological, quality and other requirements such as
HSE requirement, financing package and complexity of works. In many situations
ELEGANT have proved its capability to undertake projects on fast track basis.
ELEGANT have also established its versatility to successfully meet the different
needs of various sectors, be its captive power, utility power generation or for the oil
flexibility to exhibited adaptability by manufacturing and supplying intermediate
products
1.3 VISION, MISSION AND VALUES
MISSION
To provide superlative products through research and development and cater to
global industries while providing value added solutions and responsive service to
all our customers.
VISION
To emerge as a leading world-class Tube Plant Manufacturer through dedication,
discipline and determination.
VALUE
 Integrity and fairness in all matters
 Respect for dignity and potential of Individuals
 Strict adherence to commitment
 Ensure speed of response
 Faster learning creativity and teamwork

 Loyalty and pride in the company
1.4 CONTRIBUTION OF ELEGANT IN VARIOUS SECTORS
 INDUSTRY SECTOR:
Since its inception in 2010, the Industry Sector business has grown at an
impressive rate and today, contributes significantly to ELEGANT’S turnover.
Elegant, today supplies all major equipment for the industries such as: Coil
Car, Heat Exchangers, HR/CR Equipments, Tooling Division, Pipe Mill
Equipments and Hydraulic Equipments
 TRANSPORTATION SECTOR
In the transportation field, ELEGANT product range covers affordable
hydraulic equipment And are regularly tasked with sourcing seemingly
outdated or discontinued equipment hydraulic; or swapping original hydraulic
products like Hydraulic Auto Run, Power Pack, Shear and Cylinder into
modern, off-the-shelf standard equivalents with minimal, if any, re-
engineering.
 HEAVY ELECTRICALS EQUIPMENT PLANT:
Elegant used to manufacture heavy electrical equipment which helps
production in other industries. Major advantage of elegant that it’s always tries
to bring innovation in their product and try to improve its uses efficiency.
Over the year elegant has provided so many heavy plant and machinery to
different industries not only in India but also in other country and its number is
increasing day by day which one of best thing for the elegant and also for
country bas its help to provide work opportunity to many unemployed people
of country.

1.5 ELEGANT PRODUCTS
 COIL CAR
Coil Car are fabricated using high quality material to suit demands of the metal rolling
industries.
 COIL LIFTING
Lifting of vertical Coil, Mechanical Lever arrangement with auto locks & unlocks
system. Capacity 5 - 40 MT
 COIL TILTER CUM CAR
Coil tilting from Vertical to Horizontal (Vice versa) Hydraulically or Mechanical
arrangement, with or without Power Pack, Capacity up to 40 MT
 HEAT EXCHANGERS
Heat exchanger is a piece of equipment built for efficient heat transfer from one
medium to another. A heat Exchanger is used to transfer the Heat from one medium
to another. They are widely used in space heating, refrigeration, air conditioning,
power plants, chemical plants and natural gas processing.

Elegant Creations is a trusted Manufacturer of Heat Exchanger and offers heat
exchanger Equipments like Fin Tube Type Heat Exchanger, Shell and Tube Type
Heat Exchanger for range of industry sectors.
Our Shell and Fin Tube Type Heat Exchanger has a long operational life and it has a
Trouble-free functioning with rigid structure. It is corrosion resistance and its
performance is very efficient.
 FIN TUBE TYPE
Finned Tube type, for Air Heating or Oil cooling, by blowing of Air on Finned Tube.
Capacity up to 2, 00,000 J. Surface area up to 250 Sq. Mete
 FIN TUBE TYPE
Finned Tube type, for Air Heating or Oil cooling, by blowing of Air on Finned Tube.
Capacity up to 2,00,000 J. Surface area up to 250 Sq. Meter

 HR / CR EQUIPMENTS
Our wide range includes superior quality and durable finished Leveler Machines that
are most suitable for CR & HR coil.
 RE-COILER
Coil size ID 508/610 mm, width 3000 mm, weight 40 MT , Mandrel Single or Double
stub type, Expand & Collapse by Hydraulic Cylinder and with sliding base.
 SHEET CORRUGATION MACHINE
Suitable for sheet Thickness from 0.15 mm to 0.63 mm, 3600 mm long, Capacity up
to 30 Sheet per minute. Power: 22 kw, VFD drive arrangement, Screw down
arrangement / Hydraulically operated.

 TOOLING DIVISION
Our company made tolls like Adjustable Wrench, Basin pipes wrench, Combination
pliers, Wheel Spanner etc. Elegant Creations has wide experience in manufacturing
tools. Our tooling division contains all types of wrenches, pliers and spanners. We
also manufacture range of Machined Components.
 HYDRAULIC EQUIPMENTS
Hydraulic Equipments is very much demanded in the major heavy duty metal rolling
industries. Elegant Creations is trusted and affordable hydraulic equipment supplier in
India. We have innovative Hydraulic equipment designs and Hydraulic equipment
repair solutions.
We are always up for a challenge here at Elegant Creations, and are regularly tasked
with sourcing seemingly outdated or discontinued equipment hydraulic; or swapping
original hydraulic products like Hydraulic Auto Run, Power Pack, Shear and Cylinder
into modern, off-the-shelf standard equivalents with minimal, if any, re-engineering.
Getting hold of hydraulic equipments that you needed "yesterday" needn't be a
problem either.
Our Hydraulic Cylinder and 8 inch bore hydraulic cylinder user friendly design are
known for its Corrosion resistance and Sturdy construction. We can repair Hydraulic
Cylinder at very reasonable rate.
 HYDRAULIC CYLINDER
Capacity up to Bore size 450 mm x Stroke 2.5 MTR, Single / double acting,
Cushioned / Non-Cushioned type, working Pressure up to 5000 PSI, Mounting Front /
Rear Flange, Center Trunion type, Rod end Threaded or clevis type

1.6 STRATEGIC CHALLENGES
 Key Business
 Cycle time reduction
 State of the art technology
 Cost reduction
 Operational
 Timely delivery
 Material cost reduction
 Productivity improvement
 Effective utilization of machines
 Human Resource
 Motivation of employees
 Skill & Knowledge management
1.7 CRITICAL SUCCESS FACTORS
 Increase Orders of Spares/Services
 Decrease in indirect material +miscellaneous expenses
 Effective implementation
 Strengthening Internal customer concept
 Development of an Incentive Scheme
 Reward Scheme including EXCEL Awards
 Effective Contract Management
 Technology Up gradation

1.8 SWOT ANALYSIS
1.8.1 Strengths
 Low cost producer of quality equipment due to cheap labor and fully depreciated
plants.
 Flexible manufacturing set up.
 Entry barrier due to high replacement cost of its manufacturing facilities.
 Comprehensive turnkey experience from product design to commissioning.
1.8.2 Weaknesses
 High working capital requirement due to its exposure to cash starved SEBs
(State electricity boards)and high WIP.
 Inability to provide project financing
1.8.3 Opportunities
 High-expected growth in electrical equipment sectors
 High growth forecast in India’s index of industrial production would increase
demand for industrial equipment such as motors and compressors.
 The efforts are aimed at gaining access to technology, global markets as well
as securing global supply sources
1.8.4 Threats
 Technical suppliers are becoming competitors with the opening up of the Indian
economy.
 Fall in global power equipment prices can affect profitability.
 Lack of import duty gives china advantage over elegant

1.9 TIME LINE OF THE STUDY
The management of working capital is very important. It involves the study of day-to-
day affairs of the company. The motive behind the study is to develop an
understanding about the working capital management in the running business
organization and to help the company in developing the efficient working capital
management. Therefore, it helps in future planning and control decisions.
1.9.1 OBJECTIVE OF THE STUDY
 To analyze and evaluate working capital management
 To understand the profitability of company through net profit ratio
 To assess the liquidity position of the company with the help of liquid ratio
 To assess and evaluate proportion of various components of working capital
 To suggest ways for better management and control of working capital in
ELEGANT
1.9.2 SCOPEOF THE STUDY
The study is conducted at ELEGANT CREATION PVT. LTD. for 6 weeks duration.
The scope of study is limited to the availability of official records and information
provided by the employees. This study is related to the financial information of last 5
years of BHEL. This project will have great scope and is of great importance for me,
for other students as well as for company itself as:
 This project will be a learning device for finance students.
 This project will be a learning of planning and financing working capital.
 This project will also be effective for the credit policies of the company.
 This will show different methods of holding inventory and dealing with cash
and receivables.
 This project will show liquidity position of the company and also how do they
maintain a particular liquidity position.

2. WORKING CAPITAL
2.1. MEANING
Management of current assets is known as working capital. It is the part of total
capital which is used for carrying day to day operations. In other words, it is that
amount which is used to finance routine operations. In a nutshell it is that capital with
which the business is worked over. Thus, we can say that the capital invested in
various current assets such as raw materials, work in progress, finished goods, cash
and bank balances, debtors constitutes the working capital.
2.2. DEFINITION
According to shoo-in, “Working Capital is the amount of funds necessary to cover the
cost of operating the enterprise”. Working Capital is also known as Revolving or
Circulating Capital.
According to Genesterberg, “Circulating Capital means current assets of a company
that are changed in the ordinary cause of business from one to another form. Example:
From cash to inventory, inventories to bills receivable and bills receivable to cash.
2.3. CALCIFICATION OF WORKING CAPITAL ON THE BASIS
OF CONCEPT
There are 5 concepts of working capital
 Gross working capital: Gross working capital is simply an investment in
current assets. Current assets are those assets which can be converted into cash
within an accounting year and includes cash and marketable securities.
 Net working capital: Net working capital refers to difference between current
assets and current liabilities. Current liabilities are claims of outsiders which
are to be paid within a year
 Negative working capital: Negative working capital means excess of current
liabilities over current assets
 Permanent working capital: Permanent working capital refers to minimum
amount of investment in current assets required throughout the year for

carrying out the business. In a nutshell, it is that amount which remains in
business permanently in one form or other.
 Variable working capital: Variable working capital refers to that amount
which keeps on fluctuating or changing from time to time with the change in
volume of business activities.
2.4. NEED OF WORKING CAPITAL
In every business undertaking funds are required for two main purposes that is
investment in fixed assets and investment in current assets.
Funds which are invested in current assets such as inventory, debtors and other
current assets keeps on changing in volume as well as shape. Usually in the beginning
company has some cash; this cash may be the source of material, keeping labor costs
and other overheads. Combination of these three would generate work in progress
which will get converted into finished goods once the production process is over and
then to debtors and when debtors pay the amount cash is generated by firm.
Working capital is always required to maintain the sales activities. If company does
not have adequate working capital, it will affect firm’s ability to maintain sales as
firm may not be in position to procure raw materials, pay wages or other expenses and
produce the goods required for sales.
2.5. NATURE OF WORKING CAPITAL
Working capital refers to the funds required for meeting day to day requirements of
enterprise. Usually a part of the fixed or permanent capital is invested in those assets
which are kept in business for a longer period in order to earn profits. These are
known as fixed assets like land and building, plant and machinery, furniture and
intangible assets like goodwill, patents and trademark.
Another part of permanent working capital which is left in business is kept to support
day- to- day operations which is known as working capital. Working capital is the
most important element of cost like materials, wages and expenses. In case of
manufacturing firm such costs lead to production as well as sales and sales alone in
case of others. These costs do not arise abruptly as it occurs gradually in a flow.

Hence the initial investment of cash as working capital for such purposes has to be
continued until sales revenue starts flowing in substantially and in regular way. At this
stage business is able to gain its own momentum. The flow of revenue is expected to
continue to replace cost lost in its day-to-day outflow for revenue generation.
2.6. SOURCES OF WORKING CAPITAL
The financial manager always wants to raise working capital at a right time, at the
reasonable cost and in the best possible manner. A part of working capital investment
are permanent investments is fixed assets. There are several sources of working
capital. Sources are mainly divided into two-
 -Long term sources
 Short term sources
LONG TERM SOURCES OF WORKING CAPITAL
 Issue of shares
 Floating of debentures
 Loans
 Public deposit
SHORT TERM SOURCES OF WORKING CAPITAL
Internal sources
 Depreciation
 Taxation
 Accrued expenses
External sources
 Trade credit
 Credit papers
 Bank credit
 Customer’s credit
 Government assistances
 Loan from directors
 Security of employees

2.7. IMPORTANCE OF WORKING CAPITAL
 TIME DEVOTED TO WORKING CAPITAL MAANGEMENT
Most of the time of financial manager is devoted to day to day internal operation of
the firm. This may be appropriately sum up under the head working capital
management.
 INVESTMENT IN CURRENT ASSETS
Current assets constitute more than half of total assets of a firm. Moreover, it is a
large investment and this investment is very volatile so it require careful attention of
financial manager.
 IMPORTANCE FOR SMALLER FIRMS
Smaller firms have very limited access to long term markets, so they majorly rely on
trade credit and short term bank loan. It increases current liabilities so it is to be
carefully managed.
2.8. FACTORS AFFECTING WORKING CAPITAL
 NATURE OF BUSINESS
The requirement of working capital is very limited in public utility undertaking such
as Electricity, Water Supply and Railways because they offer cash sales only and
supply services not products and no funds are tied up in inventories and receivables.
On the other hand, the trading and financial firm requires less investment in fixed
assets but have to invest largeamounts in current assets. The manufacturing
undertaking requires sizable amount of working capital along with fixed investments.
 PRODUCTION CYCLE
The determination of working capital needs depends upon the production policy of
the business. The demand for certain products is seasonal i.e.; such products are
purchased in certain months of a year. For such industries, two types of production
policy can be followed. Firstly they can produce the goods in the months of demand
or secondly, they produce for the whole year. If the second alternative were followed,

it would mean that until the time of demand finishes, product would have to be kept
in stock. It would require additional working capital.
 RATE OF STOCK TURNOVER
There is a negative relationship between the quantum of working capital and the
velocity or speed with which the sales are affected. A firm having a higher rate of
stock turnover will need lower amount of working capital as compared to a firm
having a low rate of turnover.
 CREDIT POLICY
Credit policy affects requirement in 2 ways:
1. Terms of credit allowed by customer to the firm.
2. Terms of credit available to firm.
A concern that purchases its requirements on cash basis and sells its goods on cash
basis requires less working capital and vice-versa.
 WORKING CAPITAL CYCLE
The speed with which the working cycle completes one cycle determines the
requirements of working capital. Longer the cycle larger is the requirement of
working capital.
 EXPANSION OF BUSINESS
The larger size businesses require more permanent and variable working capital in
comparison to small business. If a company is growing, its working capital
requirements will also go on increasing. Thus, the growing concerns require more
working capital as compared to the stable industries.
 BUSINESS FLUCTUATION
In period of boom, when the business is prosperous, there is a need for larger amount
of working capital due to rise in sales, rise in prices, optimistic expansion of business
etc. On the contrary in time of depression, the business contracts, sales decline,
difficulties are faced in collection from debtors and the firm may have a large amount
of working capital idle.

 AVAILABILITY OF RAW MATERIAL
Availability of raw material on the continuous basis affects the requirement of
working capital. There are certain types of raw materials, which are not available
regularly. In such a situation firm requires greater working capital to meet the
requirements of production. Some raw materials are available in particular season
only for example wool, cotton, oil seeds, etc. They have to keep greater working
capital.
2.9. WORKING CAPITAL MANAGEMENT
2.9.1 INTRODUCTION
Working capital management is one of the most important aspects of financial
management. It is one of the major functions of a finance manager
2.9.2 MEANING
Working capital management means managing and administrating all aspects of
working capital that is current assets and current liabilities.
According to Smith, “working capital management is concerned with problems that
occurs while managing the current assets, current liabilities and inter-relationship that
exist between them”.
2.9.3 OBJECTIVE OF WORKING CAPITAL MANAGEMENT
The main objective of working capital management is to manage the working capital
of the firm that is current assets and current liabilities in such a manner that an
adequate level of working capital is maintained. It is done to ensure that neither
excessive nor inadequate working capital is maintained. This is very important
because if any firm has excessive or large working capital, the liquidity position of a
firm would improve but its profitability would be negatively affected, as funds would
remain idle. On the other hand, if the working capital of a firm is too small, the
profitability of firm would improve, but the liquidity position of firm would be
negatively affected.

2.9.4 ADVANTAGES OF WORKING CAPITAL
 It helps the business in maintaining the goodwill
 It is easy for firms to procure loans from banks and other financial institutions
on easy and favorable terms.
 It enables firms to face crisis and other circumstances such as depression.
 It creates an environment of confidence, security and brings overall efficiency
in a business.
 It helps in maintaining solvency of business.
2.9.5. DISADVANTAGES OF WORKING CAPITAL MANAGEMENT
 Rate of return on investments also fall with the shortage of working capital
 Excess working capital may result into overall inefficiency in organization
 Excess working capital indicates idle funds which earn no profits.
 Inadequate working capital can’t pay short term liabilities in time.

3. LITERATURE REVIEW
1. Miss. Mohanapriya, M.B.A, in her research on “Working capital
management of Tanjore co-operative milk supply society Ltd.” Which is the
partial fulfillment of the requirements for the award of her degree submitted to
Bharathidasan University, in the year November – 2003.Outlined the
following objectives and findings.
 Her Objectives were:
 Know the project of Co-operative milk supply society.
 Analysis the short term liquidity position of the study unit during the period
96-97 to 2000-01.
 Analysis and evaluate working capital management.
 Her Findings were:
 The size of current assets has increased during the study period.
 During the study period the working capital turnover ratio were 210.51;
 The cash turnover ratio is to be increasing times.
2. Miss. Abiramisundhari, in her research on “Working capital
management of TSRM Limited Trichy”. Which is the partial fulfillment of
the requirements for the award of her M.Com degree submitted to
Bharathidasan University, in the year November – 2003. Outlined the
following objectives and findings.
 Her Objectives were:
 To study the importance of W/c management for a concern.
 To assess the proportion of the components of W/c of TSRM Ltd, Trichy.
 To suggest measures to increases the efficiency of W/c management of
TSRM Ltd, Trichy.
 Her Findings were:
 The company has been taken for sufficient care for the maintenance of
adequate accounting period.
 The proportion of net W/c to total assets showed on increasing trend
through out the five years.

3. Mr. Kamaraj, M, Phil, in his research on “Working capital management
of Dalmia Cement Limited Trichy”. Which is the partial fulfillment of the
requirements for the award of her degree submitted to Bharathidasan
University, in the year November – 2003. Outlined the following objectives
and findings.
 His Objectives were:
 To know the Financial Performance of Dalmia Cement.
 To examine the practice follow into Management of cash.
 To know the techniques of Inventory Management in D.C.B.C.
 His Findings were:
 Raw Material Consumption over the study period in terms of quantity and
value has showed an incise trend.
 Operating ratio is considered to be yardstick of operating efficiently of the
concern.
 Performance of the co should be judged on the basis of return on equity
capital. It is satisfactory positive
4. Mr. KushagraDabur, in his research on “Working capital management of
Kotak Mahindra Life Insurance Company”. Which is the partial fulfillment of
the requirements for the award of her degree submitted to Amity University,
Uttar Pradesh, in the year February – 2006. Outlined the following objectives
and findings:
 To meet the cash disbursement needs (payment schedule);
 To minimize funds committed to cash balances.
 His Findings were:
 The relative growth rate of short term trade credit and value industrial
production.
 The relative growth rates of short term trade credit & inventories with industry
& trade.
 The incidence or multiple financing,
 The elongation of credit period.

5. Mr. Amit Kumar, in his research work on “working capital management
of Bharat Heavy Electrical Limited”. Which is the partial fulfillment of the
requirements for the award of her degree submitted to Guru Jambheshwar
University Of Science& Technology, Hisar , Haryana, Session 2008-2010
outline the following objectives and finding


4. RESEARCH METHODOLOGY
The term research refers to the systematic method consisting of enunciating
the problem, formulating the hypothesis, collecting the data, analyzing the
facts and reaching a certain conclusions either in the form of solution towards
the concern problem or in certain generalization for some theoretical
formulation.
Research methodology is a way to solve systematically the research problem.
It may be understood as a science of studying how research is done
scientifically.
4.1. TIME PERIOD OF THE STUDY
The present study was undertaken during a period of 6 weeks from 2st June 2018- 16th
July 2018.
4.2. TYPE OF RESEARCH
Descriptive research procedure is used for describing the recent situations in the
Elegant and analytical research to analyze the results by using research tools.
Descriptive research also known as statistical research, describes data and
characteristics about population or phenomenon being studied. Descriptive research
answers the questions who, what, where, when, and how… It deals with everything
that can be counted and studied.
4.3. DATA SOURCES
Data collection was through literature survey and expert opinion. Literature survey
includes the collection of data from various sources like bank agreement and
statement, handbooks as well as study material.
A part of data was collected from primary data and other was collected from the
secondary data.
Primary sources
Informationgatheredbyinterview anddiscussionswiththe head and employees of various
departments and my project guide.
Secondary sources

 Company annual report.
 Published information on finance.
 Internal circulation booklets.
 Company Websites

5. DATA ANALYSIS AND INTERPRETATION
5.1. RECEIVABLES MANAGEMENT
5.1.1. Introduction:
Receivables are a major part of total assets of business. Whenever a firm sales goods
or services on credit ad payments are to be made on future dates then receivables are
created. If they sell on cash basis then no receivables are created.
5.1.2. Meaning:
Receivable are asset accounts representing amounts owed to the firm as a
result of sale of goods or services in the ordinary course of business.
5.1.3. Purpose of receivables:
Accounts receivables are created because of credit sales. The purpose of
receivables is directly connected with the objectives of making credit
sales. The objectives of credit sales are as follows-
 Achieving growth in sales.
 Increasing profits.
 Meeting competition.
5.1.4. Factors affecting the size of Receivables:
The main factors that affect the size of the receivables are-
 Level of sales.
 Credit period.
 Cash discount.
5.1.5. Receivables management:
The main objective of receivables management is to increase sales and profits
till the point where return on investment in further funding of receivables is
less than the cost of funds raised to finance the additional credit that is cost of
capital. But increase in receivables increases the risk of bad debts. So creation
of receivables is beneficial as well as dangerous. In a nutshell, receivables
management means process of making decisions relating to investment of
funds in this asset so that overall return on investment can be maximized of
the firm.

5.1.6. Receivables management and Ratio Analysis:
Ratio Analysis is one of the important techniques that can be used to check the
efficiency with which receivables management is being managed by a firm.
The most important ratios for receivables management are as follows-
5.1.7. DEBTORS TURNOVER RATIO: -
Debtors are an important component of current assets and therefore the quality
of the debtors to a great extent determines a firm’s liquidity. It shows how
quickly receivables or debtors are converted into cash. In other words, the
DTR is a test of the liquidity of the debtors of a firm. The liquidity of firm’s
receivables can be examined in two ways they are DTR and Average
Collection Period.
It indicates the number of time debtors turned over each year. Generally the
higher value of debtor’s turnover shows high efficiency to manage the credit
sales.
Credit sales
Debtors turnover ratio = ______________________________
Debtors
TABLE –1
STATEMENT SHOWING DEBTORS TURNOVER RATIO
Rs in lakhs
YEAR 2013-2014 2014-2015 2015-2016 2016-2017 2017-2018
TOTAL
SALES
72137 82730 72117 88823 99958
DEBTORS 25678 25336 29234 28071 27325
DEBTOR
TURNOVER
RATIO
2.80
3.26 2.46 3.16 3.65
SOURCE: SECONDARY DATA FROM ELEGANT ANNUAL REPORTS

GRAPH No:1
INTERPRETATION
Debtors are an important element of current assets so it affects the liquidity to a great
extent. It reflects how quickly debtors are converted into cash. In other words, it is a
test of liquidity of the debtors of a firm. The higher the ratio, better it is as debts are
collected promptly.
Debtors depend upon level of operations. As level of operation increases, sales
increases and debtors also increase. Amount of debtors was highest in year 2017-2018
and Lowest in the year 2015-2016 and flaunting in the remaining year
Debtor turnover ratio is decreasing elegant have to take steps to improve collection
strategies. So that they can improve their debtors ration. As we saw that the debtors
ratio has been improved in the year 2017-2018
There are no specific criteria to evaluate credit worthiness of debtors as most of the
customers are government undertakings. So, there are least chances of bad debts. Bad
debts can occur only due to holding of projects.
0
0.5
1
1.5
2
2.5
3
3.5
4
2013-2014 2014-2015 2015-2016 2016-2017 2017-2018
2.8
3.26
2.46
3.16
3.65
DTR
DTR

5.8. DEBT COLLECTION PERIOD
Debtor’s collection period is nothing but the period required to collect the
money from the customers after selling goods on credit. Quick collection
reduces the length of operating cycle and vice versa. More quickly customers
pay their debts, there will be lower expenses of collection and less risk of bad
debts.
It indicates the speed with which debts are collected.
Days/months in a year
Debt collection period = _______________________________
Debtor’s turnover rate
TABLE – 2
Rs in lakh
YEAR 2013-2014 2014-2015 2015-2016 2016-2017 2017-2018
DAYS 365 365 365 365 365
DEBT
TURNOVER
RATIO
2.80
3.26 2.46 3.16 3.65
DEBT
COLLECTION
PERIOD
130 112 148 116 100

GRAPH` no : 2
INTERPRETATION
The debt collection period of elegant was 130 days in the year 2013-2014 and now
decreased to 112 days in the year 2014-2015. It shows earlier debts were collected not
quickly but now they are collected promptly.
This fact was discussed with management and they pointed that due to overall
recession in global market, company has to make their policy liberal in providing the
credit.
Standard debt collection of any firm should be less than 90 days but elegant has
increased debt collection period rapidly.
130
112
148
116
100
0
20
40
60
80
100
120
140
160
2013-2014 2014-2015 2015-2016 2016-2017 2017-2018

5.2. INVENTORY MANAGEMENT
5.2.1. Introduction
Inventories are stock of product held by company at any particular time. There are
several forms in which inventory exist that is raw materials, work in progress and
finished goods.
 Raw materials are the basic inputs that are converted into finished goods
through manufacturing process. These are those units which have been
purchased and stored for future production
 Work-in-progress is semi manufactured goods. These are those products that
need processing before becoming finished goods for sale.
 Finished goods are completely manufactured goods which are ready for sale.
These inventories serve as a link between production and consumption of
goods.
 Stores and spare parts are also maintained by some firms. These products are
very necessary for production process.
5.2.2. Need to hold inventory
Maintaining inventories involves blocking of funds and incurring storage and
handling costs. There are generally three motives of holding inventories
 Transaction motive – there is a need to maintain inventory to facilitate smooth
production and sales operations.
 Precautionary motive – it is necessary to hold inventories to guard against risk
of unpredictable changes in demand and supply forces and other factors.
 Speculative motive – there is a need to increase or decrease inventory levels to
take advantage of price influences.
A company should maintain adequate stock of materials for a continuous
supply to the factory for the uninterrupted production. It is not possible for a
company to procure raw materials whenever it is needed. A time lag exists
between demand for materials and its supply. Also there exists uncertainty in
procuring raw materials in time on many occasions. The procurement of
materials may be delayed because of such factors as strike, transport

disruption or short supply. Therefore, the firm should maintain sufficient stock
of raw materials at a given time to stream line production.
5.2.3. Inventory management techniques
In managing inventories the firm objective should be in consonance with the
shareholders' wealth maximization principle. To achieve this firm should determine
the optimum level of inventory. Efficiently controlled inventories make the firm
flexible. Inefficient inventory control results in unbalanced inventory and
inflexibility-the firm may sometimes run out of stock and sometimes may pileup
unnecessary stocks. This increases level of investment and makes the firm
unprofitable.
To manage inventories efficiency, answers should be sought to the following two
questions.
 How much should be ordered?
 When it should be ordered?
The first question how much to order, relates to the problem of determining economic
order quantity (EOQ), and is answered with an analysis of costs of manufacturing
certain level of inventories. The second question when to order arise because of
determining the reorder point.
When the order is placed for raw material which is in transit, such raw material is
called as raw material in transit.
Example – Raw material on overseas
The raw material can be transferred from unit to another unit or from one department
to another is called transfer-in–transit. It is nothing but to the transfer of raw material
among inter firm units of BHEL.
The raw material, which is in production process, is called work-in process. The work
in process becomes finished goods inventory. The finished should not be kept for a
longer time. They should be sold off to clear off the entire inventory. However,
finished goods inventory is not there for BHEL, since production is mainly done on
customer order and specifications. The raw material is purchased and the whole
process is repeated again which we call it as inventory cycle.

5.2.4. INVENTORY TURNOVER RATIO
Inventory turnover ratio indicates the efficiency of the firm in producing and selling
its products. It is calculated by dividing the cost of goods sold by the average
inventory. The average inventory is the average of opening and closing balance of
inventory.
TABLE –3
INVENTORY TURNOVER RATIO
It indicates the inventories turning into receivables through sales.
Sales
Inventory turnover ratio =__________________________
Inventory
Table – 3
(Rs in lakh)
SOURCE: SECONDARY DATA FROM ELEGANT ANNUAL REPORT
YEAR 2013-2014 2014-2015 2015-2016 2016-2017 2017-2018
SALES 72137 82730 72117 88823 99958
INVENTORY 20963 33549 21764 27797 30122
INVENTORY
TURNOVER
RATIO
3.44 2.46 3.31 3.19 3.33

GRAPH NO: 3
INTERPRETATION
This ratio indicates the liquidity of the inventory, that is, how quickly, on the average,
the inventory was sold during the year and consequently the significance of the
inventory for the debt paying purposes.
A high stock turnover ratio is generally considered desirable because it is indicative of
efficient performance since an improvement in the ratio shows indicate volume of
sales has been either maintained or increased without additional investment in stock.
Inventory turnover ratio of ELEGANT in the year 2013-2014 was maximum that is
3.44 and is lowest in the year 2014-2015 that is 2.46. Increase in inventory was on
account of induction of material pending conversion to finished goods.
Various investment management techniques such as LIFO, FIFO and ABC are used.
Company has to take steps in order to reduce inventory in order to have better
investment management.
3.44
2.46
3.31
3.19
3.33
0
0.5
1
1.5
2
2.5
3
3.5
4
2013-2014 2014-2015 2015-2016 2016-2017 2017-2018
ITR
ITR

5.2.5. INVENTORY HOLDING PERIOD
TABLE –4
Rs in crores
YEAR 2013-2014 2014-2015 2015-2016 2016-2017 2017-2018
DAYS /
MONTH IN
YEAR
365 365 365 365 365
INVENTORY
TURNOVER
RATIO
3.44 2.46 3.31 3.19 3.33
INVENTORYH
OLDING
PERIOD
106 148 110 114 110
INTERPRETATION
Inventory holding period of BHEL is varying every year. No of days are more in
2011-2012 and 2014-2015. In the year 2014-2015 inventory was pending for
conversion to finished goods. It should be properly managed and efforts should be
made to increase sales.
0
20
40
60
80
100
120
140
160
2013-2014 2014-2015 2015-2016 2016-2017 2017-2018
IHP
IHP

5.3. CASH MANAGEMENT
5.3.1. Introduction
Cash management is one of the key areas of working capital management.
Cash is the liquid current asset. The main duty of the finance manager is to
provide adequate cash to all segments of the organization. The important
reason for maintaining cash balances is the transaction motive. A firm
enters into variety of transactions to accomplish its objectives which have
to be paid in the form of cash.
5.3.2. Meaning of cash
The term “cash” with reference to cash management is used in two senses. In a
narrower sense it includes coins, currency notes, cheque, bank drafts held by a firm.
In a broader sense it also includes “near-cash assets” such as marketable securities
and time deposits with banks.
5.3.3. Objectives of cash management:
There are two basic objectives of cash management
 To meet the cash disbursement needs as per the payment schedule.
 To minimize the amount locked up as cash balances.
5.3.4. Basic problems in cash management
Cash management involves the following four basic problems.
 Controlling level of cash
 Controlling inflows of cash
 Controlling outflows of cash
 Optimum investment of surplus cash
5.3.5. Safety level of cash
The finance manager has to take into account the minimum cash balance that the firm
must keep to avoid risk or cost of running out of funds. Such minimum level may be
termed as “safety level of cash”. The finance manager determines the safety level of
cash separately both for normal periods and peak periods.
5.3.6. Criteria for investment of surplus cash:
In most of the companies there are usually no formal written instructions for investing
the surplus cash. It is left to the discretion and judgment of the finance manager.

While exercising such judgment, he usually takes into consideration the following
factors-
 Security – this can be ensured by investing in those securities whose price
remains more or less stable.
 Liquidity – this can be ensured by investing money in short term securities
including short term deposits with banks.
 Yield – it is of somewhat less important as compared to security and liquidity
of investment. So, most of the firms prefer short term government securities
for investing surplus cash.
 Maturity – it is always advisable to select securities according to their maturity
as finance manager can maximize their yield as well as maintain liquidity of
investments.
5.3.7. CASH RATIO
It is relationship between cash and current liabilities.
Cash
Cash ratio = _______________________
Current liabilities
STATEMENT SHOWING CASH RATIO
TABLE – 5
Rs in lakhs
YEAR 2013-2014 2014-2015 2015-2016 2016-2017 2017-2018
CASH 8135 7672 8732 11873 10813
CURRENT
LIABILITIES
23931 27915 23821 21542 23207
CASH RATIO 0.34 0.27 0.36 0.55 0.46

CGRAPH NO : 5
INTERPRETATION
If we see current liabilities it was increased in the year 2016-2017 as compared to
previous year due to increase in purchase of materials and higher inventory level due
to higher level of operations. But it reduced further due to reduced advances from
customers and lower level of operations.
Cash balance was fluctuating year by year as a result cash ratio was also fluctuating.
In the year 2013 and 2014 firm is maintaining sufficient level of cash to meet its
current liability.
0.34
0.27
0.36
0.55
0.46
0
0.1
0.2
0.3
0.4
0.5
0.6
2013-2014 2014-2015 2015-2016 2016-2017 2017-2018
CR
CR

TABLE –6
5.3.8. CASH TO CURRENT ASSETS RATIO
Rs in LAKH
YEAR 2013-2014 2014-2015 2015-2016 2016-2017 2017-2018
CASH 8335 7672 8732 11873 10813
CURRENT
ASSETS
53271 58849 60960 62598 58532
CASH TO
CURRENT
ASSETS
RATIO
0.15 0.13 0.14 0.18 0.19
Chart no:6
0.15
0.13
0.14
0.18
0.19
0
0.02
0.04
0.06
0.08
0.1
0.12
0.14
0.16
0.18
0.2
2013-2014 2014-2015 2015-2016 2016-2017 2017-2018
CAR
CAR

INTERPRETATION
The cash to current assets turnover was fluctuating but was same in last 2 years.
Current assets were increasing due to operational requirements and increase in
deposits or advances with statutory authorities. It reduced in the year 2015 due to
decrease in advances for purchases and others. Cash was around 20 percent of all
current assets
5.4.ANALYSIS OF VARIOUS COMPONENTS OF WORKING CAPITAL
TABLE - 7
Rs in lakhs
Particulars
2013-
2014
2014-
2015
2015-2016 2016-2017 2017-
2018
Inventories 27.27
44.32
19.17
1.75
7.49
24.75
43.94
23.66
0.30
8.32
23.08
57.36
15.17
0.39
3.98
18.83
53.96
22.82
0.48
3.89
20.81
54.02
20.21
0.36
4.17
Sundry debtors
C& B balance
Other assets
Loans and advances
Total 100 100 100 100 100
SOURCE: SECONDARY DATA
INTERPRETATION
Sundry debtors are the major part of current assets in all the five years so company
should manage their receivables very efficiently. Elegant has to take steps to maintain
adequate amount on cash and bank balance in future. Other current assets represent
interest accrued on bank deposits or other deposits

INTERPRETATION
Inventory forms the second major constituent of current asset. In the year 2013-2014
inventory increased by 2.49%. Reason behind that was increase in level of operations.
But if see further inventory reduced in the year 2017 due to reduced level of
operations. In the year 2018 inventory again increased as compared to previous year
due to induction of material pending to conversion to finished goods.
Debtors are the major element of current assets. It increased till the year 2015 due to
increase in level of operations and increased in deferred debts. But it reduced in the
year 2014 due to reduced level of operations. There are very less chances of bad debts
as most of their customers are government or public sector undertakings.
Balance of cash was fluctuating in the last 5 years. Company has to take steps in order
to maintain adequate level of cash
Short term loans were relatively stable in the last years. It was decreasing due to
reduced advances for purchases and others. Increase in the year 2014 was due to
increase in operational requirement. Increase in loans and advance in the year 2015
was on account of increase in advances or deposits with statutory authorities.Other
current assets represent interest accrued on deposits with banks or interest accrued on
investments done by Elegant
27.27
24.75
23.08
18.83
20.81
44.32 43.94
57.36
53.96 54.02
19.17
23.66
15.17
22.82
20.21
1.75 0.3 0.39 0.48 0.36
7.49 8.32
3.98 3.89 4.17
2013-2014 2014-2015 2015-2016 2016-2017 2017-20018
0
10
20
30
40
50
60
70
Chart Title
Inventories
sundarty debtors
c & b balance
other asests
loans and advances

5.5.WORKING CAPITAL
TABLE - 8
Rs in lakhs
YEAR 2013-2014 2014-2015 2015-2016 2016-2017 2017-2018
CURRENT
ASSETS
53271 58849 60960 62598 58532
CURRENT
LIABILITIES
23931 27915 23821 21542 23207
WORKING
CAPITAL 29340 30934 37139 41053 35325
GRAPH NO:8
29340
30934
37139
41053
35325
0
5000
10000
15000
20000
25000
30000
35000
40000
45000
2013-2014 2014-2015 2015-2016 2016-2017 2017-2018
working capital
working capital

INTERPRETATION
In this table we can see current assets are increasing in all the 4 years but got reduced
in the year 2018 due to reduced inventory and short term borrowings as there were
reduced advances for purchases and others in the year 2018.
If we see current liabilities, it is decreasing due to reduced advances from customers
and lower level of operations. As a result working capital also got increased and was
almost same in last 2 years which shows company has sufficient funds to meet its
current liabilities.
5.6. WORKING CAPITAL TURNOVER RATIO
TABLE - 9
Rs in lakhs
YEAR 2013-2014 2014-2015 2015-2016 2016-2017 2017-2018
SALES 72137 82730 72117 88823 99958
NET
WORKING
CAPITAL
29340 30934 37139 41053 35325
WORKING
CAPITAL
TURNOVER
RATIO
2.45 2.67 1.94 2.16 2.82

GRAPH NO : 9
INTERPRETATION
Working capital turnover ratio is flaunting year by year. It was lower in the year 2015
when compared to past four years. Reason behind that was basically reduced level of
operations. Moreover, working capital management has to improve by more
concentration on collection strategies.
2.45
2.67
1.94
2.16
2.82
0
0.5
1
1.5
2
2.5
3
2013-2014 2014-2015 2015-2016 2016-2017 2017-2018
wctr
wctr

5.7. ANALYSIS OF LIQUIDITY POSITION
5.7.1. CURRENT RATIO
The relationship of current assets to current liabilities is known as current ratio. It is
also known as banker’s ratio or working capital ratio.
It is relationship between firm’s current assets and current liability.
Current assets
Current ratio = _______________________________
Current liability
STATEMENT SHOWING CURRENT RATIO
TABLE - 10
Rs in lakhs
YEAR 2013-2014 2014-2015 2015-2016 2016-2017 2017-2018
CURRENT
ASSETS
53271 58849 60960 62598 58532
CURRENT
LIABILITIES
23931 27915 23821 21542 23207
CURRENT
RATIO
2.22 2.10 2.55 2.90 2.52

GRAPH NO: 10
INTERPRETATION
It is often accepted that current assets should be twice of current liabilities. In the year
2013, this ratio was 2.22 which slightly reduced in the year 2014. And further this
ratio increased subsequently to 2.55 in the year 2015. This means some of the funds
are still lying idle. Company should take steps to put those funds in productive use
0
0.5
1
1.5
2
2.5
3
2013-2014 2014-2015 2015-2016 2016-2017 2017-2018
2.22
2.1
2.55
2.9
2.52
current ratio
current ratio

5.7.2. QUICK RATIO
It establishes the relationship of a company’s current assets that can be quickly
converted into cash and its current liabilities.
It is relationship between liquid assets and current liabilities.
Liquid assets
Quick ratio = _________________________
Liquid Liabilities
STATEMENT SHOWING QUICK RATIO
TABLE - 11
Rs in lakhs
YEAR 2013-2014 2014-2015 2015-2016 2016-2017 2017-2018
LIQUID
ASSETS
32308 25300 39196 34801 28410
LIQUID
LIABILITIES
23931 27915 23821 21542 23207
LIQUID
RATIO
1.35 0.90 1.64 1.61 1.22

GRAPH NO: 11
INTERPRETATION
It measures the debt paying ability of an enterprise. Generally liquid assets should be
same as current liabilities. It reduced slightly in the year 2014 by 0.45. then, it
increased subsequently and was maximum in the year 2015 that is 1.64. This shows
funds are lying idle as there was some inventory in the year 2015 which was pending
for conversion to finished goods.
In nutshell, company’s overall liquidity position is sound means company is having
sufficient funds to meet its day to day expenses.
0
0.2
0.4
0.6
0.8
1
1.2
1.4
1.6
1.8
2013-2014
2014-2015
2015-2016
2016-2017
2017-2018
1.35
0.9
1.64
1.61
1.22
liquid ratio
liquid ratio

5.8. ANALYSIS OF PROFITABILITY
5.8.1. NET PROFIT RATIO:
As every business is to earn profit, this ratio is very important because it measures the
profitability of sales. A business may yield high gross income but low net income
because of increasing operating and non-operating expenses. This situation can easily
be detected by calculating this ratio.
The profits used for this purpose may be profits after/before tax. To obtain this ratio,
the figure of net profits after tax is divided by the figure of sales the ratio is also
known as sales margin as we can ascertain with its help the margin which the sales
leave later deducting all the expenses. The unit of expression is percentage, as is the
case with profitability ratios.
ANALYSIS OF NET PROFIT RATIO
TABLE - 12
(Rs in lakhs)
Particulars 2013-2014 2014-2015 2015-2016 2016-2017 2017-2018
Net Profit / Profit
after tax
15252 16254 11542 9564 14567
Net Sales 72137 82730 72117 88823 99958
Net Profit ratio 0.21 0.19 0.16 0.10 0.17
SOURCE: SECONDARY REPORTS FROM ELEGANT ANNUAL REPORTS

INTERPRETATION
Net profit increased by 1002 lakhs or 17.29% in the year 2014 as revenue from
operations increased by 13.26%. Other operational income increased by 71 lakhs due
to increase in scrap sales in line with increase in volume of operations. Further net
profit goes down in the year 2014, 2015 and 2016.
In the year 2014-2015, power segment and industry segment contributed 77% and
23% respectively for total revenue of the company as against 80% and 20%last year.
There was also a decrease in other operational income due to decrease in insurance
and freight income due to reduced level of operations.
0.21
0.19
0.16
0.1
0.17
0
0.05
0.1
0.15
0.2
0.25
2013-2014 2014-2015 2015-2016 2016-2017 2017-2018
net profit ratio
net profit ratio

6. FINDINGS
 Standard current ratio is 2:1 and for industry it is 2.52. So ELEGANT ratio is
satisfactory. Its liquidity position is sound. And if we see acid test ratio it is
1.21 in the year 2017-2018 and it is lower compared to past three years.
 Debtors of the company was highest in year 2015-2016 and then it decreased
in the year 2016-2017 and it further reduced in the year 2015 due to reduced
level of operations.
 Debtors turnover ratio is reducing from year 2013 to 2017 which means
debtors are not collected promptly. They have liberal credit policy. This means
they should focus on their collection strategies.
 Inventory turnover ratio of Elegant in the year 2013 was maximum that is 3.44
which indicates efficient performance of inventory and is lowest in the year
2014 that is 2.44 which shows inefficient performance of stock. Increase in
inventory was on account of induction of material pending conversion to
finished goods.
 Working capital turnover ratio is continuously fluctuating that shows that need
of working capital in the organization is increasing due to increase in the level
of operation and decreasing working capital shows the decrease in the level of
operation
 Production capacity is not utilized to full extent. As it can be seen from their
level of operation and net profit across the year
 The study is basically done to have a deep knowledge about WORKING
CAPITAL of the Elegant Creations pvt. limited. Elegant Creations pvt.
limited is having an appropriate working capital management of the
organizations. NET PROFIT ratio is 0.17 in 2017-2018, it is showing a
decrease in net profit as compared to last five years. but also increase from last
year
 The firm DCP is rising every year which is major concern for firm as larger
the DCP greater the chances of bad debts. Although there are less risk of bad
debts as most of the customers comprises of public sector undertakings. DTR
is also decreasing, in the year but after that its continuously starting increasing
which is not good sign for organization

 Current ratio is fulfilling its standard norm. In the financial year 2013-2014 it
was 2.2 now it has increased up to 2.52.The firm has maintained the adequate
level of current assets in order to discharge its current liabilities.
 As far as cash ratio is concerned the firms is not maintaining the sufficient
level of quick assets because of the day-to-day expenses. It is fluctuating
between the standard norms for this ratio is 1:2 means for every 2 rupees of
current Liabilities, company must have 1 rupee of cash and bank balance and
marketable securities.
 Net profit ratio of Elegant is moving to increasing trend which shows
improvement in overall efficient management of affairs of company and
profitability of the business
 Return on capital of the company is not good as its net profit of the company
is not up to the mark.
 Working capital turnover ratio of Elegant is shown as increasing trend which
tells management is being extremely efficient in using a company's assets and
liabilities to support sales


7. SUGGESTIONS & CONCLUSION
Working in field was very enriching experience and gave good exposure. It was a
golden opportunity to apply knowledge and learning gained from classroom lectures
in practical business environment. The SIP program helped in gaining knowledge and
developing the confidence level to work. It helped in knowing about the behavior of
human being, which fluctuates in different situations and time.
The project provided an excellent opportunity to apply finance concepts in real time
situation. Management of working capital and maintain of accounts book were the
two areas where we were given opportunity to work for. Both the areas involved
required a lot of creativity and out of the box thinking.
One of the best ways to judge a company's cash flow health is to take a deep look on
its working capital management. The better a company can manage its working
capital the lower company's need of borrowing. Working capital management of
Elegant Creations Pvt. Ltd. is highly effective. The project is very much profitable.
There is available internal source of fund due to satisfactory amount of period during
the period under study. They have no difficulties in management of inventory,
debtors, cash balances and current liabilities. The liquidity position of the company is
also very much satisfactory due to good turnover of current assets, inventory debtors
and cash balances. The company enjoys good facility of cash credit and other working
capital loan though the borrowing amount of the company is very low. There is no
difficulty in repayment of current liabilities out of the operating profit.
Working Capital Management of Elegant has been doing very important to the
company. It has lots of challenges as competition increases in the market and also has
lots of scope of developing in several areas. If challenges can be faced technically by
maintaining continuous support to sales teams and dealers then the credit management
practice of this company can be more effective to the overall development of the
company.

8. Reference
 Annual Reports of Elegant creation Pvt. Ltd. from the Year 2013-2014-2017-2018
 Brealey, R.Myers, S&Allen (2006). Working capital management, corporate
finance, Newyork: Mcgraw Hill.
 Chittenden, F., P. Poutziouris and N. Michaelas, 1998. Financial Management and
Working Capital Practices in UK SMEs. Manchester Business School,
Manchester.
 Chowdhury, A. and Amin, M.M (2007). “WORKING CAPITAL
MANAGEMENT PRACTICED IN PHARMACEUTICAL COMPANIES
LISTED IN DHAKA STOCK EXCHANGE”, BRAC University Journal, Vol. iv,
No. 2, pp.75-86
 Deloof, M. (2003) Does Working Capital Management affect Profitability of
Belgian Firms, Journal of Business Finance and Accounting, 30 (3), pp 573-587.
 Filbeck, G., & Krueger, M. T. (2005). An Analysis of Working Capital
Management Results Across Industries. Mid-American Journal of Business, (20),
11-18.
 Filbeck, Greg and Thomas M. Krueger. "An Analysis Of Working Capital
Management Results Across Industries". American Journal of Business 20.2
(2005): 11-20. Web.
 Ganeshan, V. (2007) An Analysis of Working Capital Management Efficiency in
Telecommunication Equipment Industry. Rivier academic journal, 3 (2). [Online]
Available from: http://www.rivier.edu/journal/ROAJ-Fall-2007/J119-Ganesan.pdf
 Raheman, A; Nasr, M (2007) Working Capital Management and Profitability:
Case of Pakistani firms, International Review of Business Research Papers. 3 (1),
PP 279-300
 D.K. Goel. (2013), Analysis of Financial Statements, 11th Ed. New Delhi: Arya
Publication
 www.slideshare.net
 Saccurato, F., 1994. The study of working capital. Bus. Credit, 96: 36-37
 Shin, H., & Soenen, L.(1998) Efficiency of Working Capital and Corporate
Profitability. Financial Practice and Education, 8(2), 37-45
 Syaduzzaman, M. (2006). “Working Capital Management: A Study on British
American Tobacco Bangladesh Company Limited”,

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