Working capital mangement in federal mogul goetze PDF

Preview

Summary

Download Working capital mangement in federal mogul goetze PDF

Description

PROJECT REPORT ON WORKING CAPITAL OF FEDERAL MOGUL GOETZE IN BAHUDARGARH A report submitted in partial fulfillment of the requirement for the degree of MASTERS OF BUSINESS ADMINISTRATION (2017-19)

SUBMITTED TODR. G.S. BATRA

1|Page

SUBMITTED BYNAVNEET KAUR CHOPRA ROLL NO – 17421028 CLASS –MBA [ SEM -4] SECTION – A

CERTIFICATE This is to certify that MISS NAVNEET KAUR CHOPRA student of MBA 2nd year, section A, Roll No.17421028, batch 2017-2019, has successfully completed her project entitled “A STUDY OF WORKING CAPITAL MANAGEMENT OFFEDERAL MOGUL GOETZE IN BAHUDARGARH under my guidance.

SIGNATURE OF PROJECT GUIDE :DR. G.S. BATRA

2|Page

ACKNOWLEDGEMENT A formal statement of acknowledgment is hardly sufficient to express my gratitude towards the personalities who have helped me to undertake and complete my project. Working on a research based major project in a live organization fuelled by the individuals with so much zest and energy, “Teaming” up to form a formidable force, was in itself a true learning experience which is going to help me immensely in my career. Working on this project has made me aware about the practical usage of business research in the field of management. I would like to thank Dr. G.S. BATRA in Punjabi University, Patiala for providing me an opportunity to undergo this overwhelming learning experience and for his active guidance, valuable advices and constant inspiration during the conduct. Most importantly, I would like to express my deep gratitude towards my parents for all their encouragement, support and affection. Without their care and concern nothing was possible for me.

NAVNEET KAUR CHOPRA

3|Page

DECLARATION I undersigned hereby declare that the research entitled “A STUDY ON WORKING CAPITAL MANAGEMENT is submitted by me to “MBA (finance), Punjabi University, Patiala” in partial fulfillment of the requirement for the degree of MBA is my original work and is based on material collected by myself. I further declare that this project work has not been submitted to this or any other university for the award of any other degree, diploma or equivalent course.

NAVNEET KAUR CHOPRA

4|Page

TABLE OF CONTENTS PARTICULARS

PAGE NO.

ABSTRACT

6-8

CHAPTER -1.INTRODUCTION

9-45

CHAPTER -2.LITERATURE REVIEW

46-52

CHAPTER -3.RESEARCH METHODOLOGY

53-55

CHAPTER -4.DATA INTERPRETATION AND ANALYSIS

56-74

CHAPTER -5.FINDINGS, SUGGESTIONS AND CONCLUSION

75-79

CHAPTER -6 ANNEURE

5|Page

80-88

ABSTRACT The project undertaken is on “WORKING CAPITAL MANAGEMENT IN FEDERAL MOGUL GOETZ”. Under this project it describes about how the company manages its working capital and the steps that are required in the management of working capital. Cash is the lifeline of a company. If this lifeline worsen, so does the company's ability to fund operations, reinvest and meet capital requirements and payments. Understanding a company's cash flow health is key to making investment decisions. A good way to judge a company's cash flow expectation is to look at its working capital management (WCM).

Working capital refers to the funds a business requires for day-to-day operations of an enterprise or, more specifically, for financing the conversion of raw materials into finished goods, which the company sells for payment. It also represents the excess of current assets over current liabilities including short term loans Among the most important items of working capital are levels of cash and its equivalents inventory, Trade receivables, and Trade payable. Analysts look at these items for signs of a company's efficiency and financial position. The working capital is an important indicator to measure the company’s operational and financial efficiency. Any company should have a optimum amount of cash and lines of credit for its business needs at all times. This project describes how the management of working capital takes place at “FEDERAL MOGULA GOETZ”

6|Page

PURPOSE OF STUDY The objectives of this project were mainly to study the inventory, cash and Trade receivable at FEDERAL MOGUL GOETZ., but there are some other reasons to study and they are The main purpose of our study is to provide a better understanding of the concept “Working Capital Management”. 1. To understand the planning and management of working capital at FEDERAL MOGUL GOETZ 2. To measure the financial soundness of the organisation by analyzing various ratios. 3. To propose ways for better management and control of working capital at the concern.

7|Page

SCOPE OF THE STUDY: Under this project is vital to me in a important way. It does have some importance for the company too. These are as follows :



This project will be a learning device for the business students.



Through this project I would study the a variety of methods of the working



capital management.



The project will help in learning of planning and financing working capital.



The project would also be an effective device for credit policies of the companies.



This will show new methods of holding inventory and dealing with cash and receivables.



This will show the liquidity position of the company and also how do they maintain a exact liquidity position.

8|Page

CHAPTER 1: INTRODUCTION

9|Page

INTRODUCTION The word finance was originally a French word. In the 18th century, it was adapted by English speaking communities to mean “the management of money.” Since then, it has found a permanent place in the English dictionary. Today, finance is not merely a word else has emerged into an academic discipline of greater significance. Finance is now organized as a branch of economics. Finance is a field that deals with the allocation of assets and liabilities over time under conditions of certainty and uncertainty. Finance also applies and uses the theories of economics at some level. Finance can also be defined as the science of money management. Finance is a broad term that describes two related activities. The study of how money is managed and the actual process of acquiring needed fund because individuals, businesses and government entities all need funding to operate the field is often separated into three sub categories personal finance, corporate finance and public finance.

TYPES OF FINANCE Finance can be broken into three different sub categories: public finance, corporate finance and personal finance. All three of which would contain many sub-categories

TP YU PB EL | P a g e 10 SI OC

PUB

TP YU PB EL SI OC F FF NI AN

I

NA CN EC E LIC FINANCE Public finance is a part of study of Economics. It borders on the fields of government and political science. Public finance is the study of the financial activities of government and public authorities. Public finance describes finance as related to sovereign states and sub-national entities (like states/ provinces) and related public entities (e.g. municipal corporations) or agencies. It describes and analyses the expenditure of government and the techniques used by government to finance these expenditures.

CORPORATE FIANNCE Corporate finance is the task of providing the funds for a corporation’s activities by raising and administering funds. Corporate finance aims at studying the funding of assets from various sources like market, general public, or various financial institutions. In this process corporate finance aims to balance risk and profitability, while attempting to maximize an entity’s wealth and the value of its stock. The importance of corporate 11 | P a g e

finance is underlined by economic and social significance in terms of increase in public responsible as the organization grows and wide distribution of the corporate of the corporate ownership in the process separating ownership from management.

PERSONAL FINANCE Personal finance refers to the financial decisions which an individual must make to plan for his future. These decisions include obtaining monetary resources, planning application of income, budgeting, decisions on amounts and mode of saving and decisions around spending monetary resources over time. During this process one is expected to take into account various financial risks and future life events that may impact current income levels or projected incomes and must plan for them.

OBJECTIVES OF FINANCE The objectives or goals or financial management are: -

a) Profit Maximization b) Return Maximization c) Wealth Maximization We shall explain these three goals of finance as under:

a) PROFIT MAXIMIZATION Maximization of profit is generally regarded as the main objective of a business enterprise. Each company collects its finance by way of issue of shares to the public. Investors in share purchase these shares in the hope of getting medium profits from the company as dividend. It is possible only when the company’s goal is to earn maximum profits out of its available resources. If company fails to distribute higher dividend, the people will not be keen to invest their money in such firm and persons who have already 12 | P a g e

invested will like to sell their money in such firm and persons who have already invested will like to sell their stocks.

b) RETURN MAXIMIZATION The second goal of financial management is to safeguard the economic interest of the persons who are directly or indirectly connected with the company, i.e., shareholder, creditors and employees. The all such interested parties must get the maximum return for their contributions. But this is possible only when the company earns higher profits or sufficient profits to discharge its obligation to them. Therefore, the goals of maximization of return are inter-related

c) WEALTH MAXIMIZATION Maximization of profits is regarded a proper objective of the firm but it is not as inclusive a goal as that of maximizing it value to its shareholder. Value is represented by the market price of the ordinary share of the company over the long run which is certainly a reflection of company’s investment and financing decisions. This does not reflect the true worth of the share because it will result in the fall of the share price in the market in the long run.

13 | P a g e

WORKING CAPITAL MANAGEMENT

14 | P a g e

INTRODUCTION TO WORKING CAPITAL “Working Capital is the Life-Blood and Controlling Nerve Center of a business”

Working capital is a budgetary metric which speak to working liquidity accessible to a business, association or other substance, including administrative essentials. Alongside fixed resources, for example, plant and gear, working capital is view as a piece of working capital. Net working capital is corresponding to current resources. Working capital is determined as present resources less current liability. Working capital is the life blood and nerve centre of a business. Just as flow of blood is essential in the human body for maintain life, working capital is very necessary to keep the level running of a business. No business can run effectively without an sufficient amount of working capital. There is functioning aspects of working capital i.e. current assets which is known as funds also employed to the business process from the gross working capital . Current asset comprise cash receivables, inventory, marketable securities held as short term asset and other items nearer to cash . Working capital comes into business operation when real operation takes place generally the condition of quantum of working capital is strong-minded by the level of production which depends upon the management manner towards risk and the factors which power the amount of cash, inventory, receivables and other current assets required to carry given volume of production. Resources however may overlook the mark regarding liquidity if its compensation can't be on time changed over into money. Positive working capital is necessary to agreement that a firm can continue with its tasks and that it has enough assets to fulfill both developing temporary responsibility and up coming set costs. The management of working capital includes supervision inventory, debt claim and payable.

15 | P a g e

EQUATION OF WORKING CAPITAL

W O K N C P A

R I G A I T L

C R E T A S T

U R N S E

C R T L B T

U E I A I L I E

R N

I S

S

INPUTS Current resources and current liabilities include four account which are of distinctive significance. These records converse to the region of the business where chiefs have the most immediate effect:



Cash and bank balance,



Inventories,



Receivables (including debtors and bills),



Marketable securities.

CONCEPTUAL FRAMEWORK Working capital means the capital available and use for day to day operation of an project. It consists generally of that part of assets of a business which are linked to its current operations. It refers to resources which are used during an bookkeeping period to generate a current income of a type which is constant with major purpose of a firm life .

16 | P a g e

Positive working capital means that the business is able to pay off its short-term liability that have a set of working capital will be additional successful since they can increase and improve their operations . Negative working capital means that a business currently is able to meet its short-term liability with its current assets. . Business with negative working capital may need the funds necessary for expansion .

THE NEED FOR THE WORKING CAPITAL The necessity for working capital emerge because of the time opening among production and recognition of money from deals. Working capital for each business is must for buying simple materials, semi completed products, stores and the associated purposes. 

To buy unfinished materials, accumulate parts and other segment. An assemble firm needs unfinished materials and different segment parts to convert them in to certain items, for this reason it require working capital. Exchange concern requires less working capital



To get together over head costs Working capital is necessary to meet repeat over head costs . Eg. cost of fuel , office costs and other assembling costs



To compensate selling and appropriation operating expense .Working capital is essential to compensate selling and dispersal costs. It incorporate cost of imperative payment



Working capital is required for fixes and upkeep both hardware just as production line structures.

17 | P a g e



Working capital is required to pay wages, pay rates and different charges.

WORKING CAITAL MANAGEMENT Working capital management is anxious with the difficulty that arise in managing the current assets , current liability and the interrelationships between them . Its set goal is to manage the current asset and current liability in such a way that a adequate level of net working capital is maintain . Working Capital Management alludes to the current funds and current liability. This is logical on the basis that liabilities emerge with regard to current asset. Its Importance :1. Investment in current resources speaks to a significant part of absolute assumption. 2. Investment in current resources and the measurement of current liabilities must be modified rapidly to change in deal. Fixed resource of business enterprise and financing are interested in variety of deals.

OBJECTIVES OF WORKING CAPITAL MANAGEMENT Efficient management of working capital

means

adequate liquidity. 1. To maximize profit of the enterprise 2. To facilitate in timely payment of bill. 3. To keep enough current assets. 4. To make sure sufficient liquidity of the firms. 5. It protect the solvency of the firm. 6. To fulfill current liability. 7. To increase the worth of the firm. 8. To minimize the danger of business.

18 | P a g e

accomplishing the firm’s goal of

SINGIFICANCE OF WORKING CAPITAL MANAGEMENT The management of working capital are important for several reasons: 

For 1 thing the current assets of usual manufacturing firm account for half of its total assets. For distribution companythey accountable for it.



Working capital needs continuous day to day supervision. Working capital had effect on company's risk return and share prices.



There is a inevitable relationship between sales growth & level of current assets. The target sales level is achieved only if supported by adequate working capital Ineffective working capital management might lead to insolvency of the firm if it is not in a position to meet its liabilities and commitments.

19 | P a g e

CLASSIFICATION OF WORKING CAPITAL : Working capital is classified as follows: K G N o P T i r n e n o t r m d s t m p s h w e o e o n r o w r e a f o b k n r a ir t y w k s n / o ig F / r n is v k g c x a i o a e r n c fp id ig a c p t W b ic t a lo n a ilt r e c p a m k l ie w p t n o t a g r l k ic a n p g i t c a l p i t a

In this graph we can see that the working capital is divided on the basis of 

concept and,



time

20 | P a g e

Further it is divided onto gross & Net and Permanent & Temporary working capital in this gross is without deducting current liabilities and net after deducting current liabilities. This is further classified as follows:

MAJOR TYPES OF WORKING CAPTITAL 

Gross Working Capital



Net Working Capital

MG Ro Ts OW Wo Kk Cn TC p a

r

A

J

O

s Y

P

E

S

F r i I gA A a i l

O

R

N

G P

T

I

L t

Gross working capital: Gross working capital is the amount of money invest in various component of current asset. Current asset are those asset which are easily changed into cash within a short period . Current asset include Cash in hand , cash at bank, inventory, Bills receivable , Sundry debtor, short term loan and advance. The following advantages are :i.

Financial manager are concerned with the current asset

ii.

Gross working capital provides the amt. of working capital at the exact time

21 | P a g e

iii.

It enable a firm to realize the return on its investment

iv.

It help in the fixation of various areas of financial accountability

v.

It enable a company to plan and to maximize the return on investment.

Net working capital: It refers to the difference between current assets and current liabilities. Net working capital will be positive or negative. positive net working capital is arise when current assets exceed current liabilities & vice-versa for negative net workingcapital. It indicates liquidity position of firm & suggests the extent to which working capital require may be financed by permanent sources of funds

Permanent working capital Permanent or fixed working capital is least sum which ...