A Study on“WORKING CAPITAL MANAGEMENT(WCM)”

 For

DELPHI CONNECTIONS SYSTEMS INDIA PVT. LTD   

                                                                                        

                                                                                Sumit Kr Singh                                                                     Fk-2777

                                                                                         PGDM-24(Finance)

COMPANY PROFILEGLOBAL SCENARIO• Headquartered in Gill Ingham, U.K• Manufacturing sites and customer support services in 44 countries• Turnover of 15.16 Billion USD.• 1, 73,000 Employees Globally• 19,000 Scientists and EngineersSTATE SCENARIO• Operation started in 2012 (Kerala ,cochin)• Production and sale of Connectors and safety restrains(connection system, Driver

Interface, Electricals, fuel cells )• 7(SEVEN) Departments• Total no of employees 468 (including non executive employee 333)

OBJECTIVES OF THE STUDY• To understand Impact of WCM on the profitability

• To study the different components of working capital and its impact on the performance of the company

• To measure the financial soundness of the firm through ratio analysis

RESEARCH DESIGN• Type of research : Descriptive research design• Sampling Plan : Five years of quantitative data• Data collection : Primary data and Secondary data • Data Analysis : Comparative ,trend and ratio analysis• Limitations of the study : Limited time period and less interaction

DATA ANALYSIS & INTERPRETATION

Trend analysis of Working Capital and Profitability (Amounts are In Indian Rupees)

March 31, 2012 March 31, 2013 March 31, 2014 March 31, 2015 March 31, 2016

GROSS WORKING CAPITAL 724,384,714  698,498,398  1,034,409,175  1,077,730,334  1,300,746,865 

NET WORKING CAPITAL(NWC) 157,529,714  161,384,374  390,948,302  495,767,502  762,860,952 

% change (NWC) 100% 102% 248% 315% 484%

Profit/(Loss) for the year 6,444,294  (67,649,638) 91,396,834  59,980,952  351,056,257 

% change in Profit 100% -1050% 1418% 931% 5448%

Comparative Analysis of Liquidity and the Profitability Ratios

YearCurrent Ratio(times)

Quick Ratio(times)

Absolute liquidity ratio(times)

Operating ratio(%)

Net profit ratio(%)

2011-12 1.28 0.88 0.07 98% 1.55%

2012-13 1.30 0.89 0.04 104% -3.43%

2013-14 1.61 1.23 0.18 96% 4.25%

2014-15 1.85 1.38 0.28 96% 2.68%

2015-16 2.42 1.72 0.55 87% 14.38%

Comparative Analysis of Turnover Ratios and Profitability Ratio

Year

Inventory Turnover Ratio(times)

Account Receivables Turnover Ratios(times)

Account Payables Ratio(times)

Fixed Assets Turnover Ratio(times)

Working Capital Turnover Ratio(times)

Net Profit Ratio(%)

2011-12 2.97 1.13 0.55 0.53 2.64 1.55%

2012-13 11.00 5.25 3.79 2.61 12.23 -3.43%

2013-14 9.31 5.15 3.14 3.37 5.50 4.25%

2014-15 8.68 4.87 3.29 3.72 4.52 2.68%

2015-16 7.53 5.05 3.70 3.51 3.20 14.38%

Comparative Analysis of Cash Conversion Cycle and Net Profit Ratio

Year

Inventory Holding Period(Days)(A)

Average Collection Period(Days)(B)

Gross Operating Cycle(A+B)(Days)

Payables payment Period(c) (Days)

Net Operating cycle(A+B-C)(DAYS)

Net profit ratio

2011-12 123 323 446 658 -212 2%

2012-13 33 70 103 96 6 -3%

2013-14 39 71 110 116 -6 4%

2014-15 42 75 117 111 6 3%

2015-16 48 72 121 99 22 14%

FINDINGS• A positive increase in Working Capital of Rs 157,529,714 (2012) to Rs 762,860,952 (2016).

• Profitability trend from the year 2013 to 2016 it reached from (-1050) % to 5448%.

• Current Ratio has increased 1.28 (2012) to 2.42 (2016) in times.

• Account receivables turnover ratio increased from 1.13 times(2012) to 5.05 times(2016)

• Inventory turnover ratio showing decreasing trend from 11 times (2013) to 7.53 times (2016) .

• Creditor’s turnover ratio increased 0.55 times(2012) to 3.79 times (2016) .

• Working capital turnover ratio showing highest in the 12.23 times (2013) and reached 3.20 times (2016).

• Working capital cycle is showing the negative days of -212 days in the year 2011-12 then again in the year 2012-

13 it shows the negative -6 days after that it reached to positive 22 days in the year 2016.

CONCLUSIONS

• Sustainable fund is available with the company.• Continuous decrease in operating expenses.• Increase in inventories, trade receivables and cash and decrease in

payables.• Macro economic effect and just in time inventory policy for some lines.• Decrease in credit days and collection of accounts receivable are

efficient.• Increase in the credit term allowed by the Vendor.• Decreasing trend of the current obligations.• Overall improvement in the Working capital component that reflected

through cash conversion cycle.

SUGGESTIONS AND RECOMMENDATIONS

• Profit and WC of the company is increasing year on year ,it has to maintain it further.

• The Current and quick ratios has almost reached to the standard requirement but cash ratio should be 0.5 times.

• There should be an improvement in its inventory turnover ratio to 9 times and holding days should be 20-25 days.

• The collection period days should maintain for maximum 70 days that will reduce the cash conversion cycle.

• Company is making good use of fixed asset of the company.

• Possibly it should maintain a negative or at least a minimum 2 days of cash cycle.