TABLE OF CONTENTS:SERIAL

NUMBERPARTICULARS PAGE NUMBER

1 CHAPTER-1-INTRODUCTION

1.1 BACKGROUND

1.2 RATIONALE

1.3 BRIEF REVIEW OF LITERATURE

1.4OBJECTIVES OF THE STUDY

1.5RESEARCH METHODOLOGY

1.6LIMITATION OF THE STUDY

1.7CHAPTER PLANNING

3

3-4

4-5

5-6

6

6-7

7-8

2 CHAPTER-2-CONCEPTUAL FRAMEWORK

2.1MEANING OF WORKING CAPITAL

2.2DEFINITION & CONCEPT OF WORKING CAPITAL

2.3WORKING CAPITAL CYCLE

2.4FACTORS DETERMINING WORKING CAPITAL

2.5MANAGEMENT OF WORKING CAPITAL

2.6NATIONAL & INTERNATIONAL SCENARIO

9-11

11-12

3 CHAPTER-3- PRESENTATION OF DATA, ANALYSIS & FINDINGS

3.1COMPANY PROFILE

3.2DATA ANALYSIS & FINDINGS

13-40

4 CHAPTER-4-CONCLUSION & RECOMMENDATION 41-43

5 BIBLIOGRAPHY 44

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CHAPTER-1INTRODUCTION

CHAPTER-1: INTRODUCTIONBACKGROUND

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Working Capital is the amount of fund necessary for the cost of operating the enterprise. Working Capital in a going concern is a revolving fund, it consists of cash received from sales which are used to cover the cost of current operations. This capital is needed for holding current assets like stock of raw material, semi – finished goods, accounts receivable. Bills receivable and cash for carrying out expenses like wages and salaries. Sources of Working capital are commercial and development bank, public deposit, ploughing back up profit and other finance companies. These are the sources of variable working capital but for permanent working capital are secured ordinary shares, preference shares, debentures, ploughing back of profits. Amount of working capital depend upon the size and scale of business unit but it is mostly dependent upon scale of production and seasonal fluctuations.

Working capital management in general refers to the administration of all aspect of current assets ie. cash, marketable securities, debtors and stock and current liabilities. Working capital management policies have a great effect on firms profitability, liquidity and its structural health.

Only those enterprises which have adequate working capital can survive in times of depression.

Excessive working capital is equally unprofitable. The extra working capital is not utilized in business operations and earns no profit for the firm. The abundance of working capital would lead to waste and inefficiency.

Shortage of working capital funds renders the firm unable to avail attractive credit opportunities etc. The firm loses its reputation when it becomes unable to honor short term obligations. As a result the firm faces tight credit terms and the growth stagnates.

RATIONALE/NEED/JUSTIFICATION

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1. Working Capital means the capital required for day to day working of the business . Actually it is the capital required to be invested in current assets less current liabilities. It will help me in knowing the components of Working Capital in a practical and better way.

2. Big Business Vs Small Business ; A big business requires a huge investment in the working capital whereas a small business requires a small investment in the working capital. It will help me draw a comparison between the two.

3. Big Holding Period Vs Small Holding Period : If holding period is big, investment requires will also be big. Similarly , if holding period is small , lesser investment is required. The comparison between the period of holding will be analyzed by me through this project.

4. The main aim of a working capital management plan is to balance current assets against liabilities. This helps companies maintain its planned expenses like salaries and short term financial obligations. If a company’s current liabilities are more than its current assets, it signifies a negative working capital. Hiring a good accounts manager who knows various techniques will take care of working capital management in a business efficiently. In case of deficiency, the company can increase the working capital with proper management of outstanding incomes, its creditors and of the company’s inventory or by getting a short term loan.

5. Working capital management always ensures sufficient cash flow in a business. This allows companies to pay their liabilities without delay and more importantly protects them bankruptcy. With an efficient working management, companies have the advantage of a positive working capital which allows them to take on higher risks in business. Companies need to analyse their current assets and liabilities regularly in order to manage their working capital. A successful working capital management can face emergencies caused by market changes and competitor activities. Good cash flow is always an asset to a company’s growth and success.

BRIEF REVIEW OF LITERATURE REVIEW

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A study undertaken by Garcia-Teruel and Martinez Solano entitled “working capital management of SMEs” year 1996, collected a panel of 8,872 small to medium sized enterprises(SMEs) from Spain covering the period 1996-2002.They tested the effects of working capital management on SMEs profitability using the panel data methodology. The result demonstrated that managers could create value by reducing their inventories and the number of days for which their accounts are outstanding. Moreover, shortening the cash conversion cycle also improves the firm’s profitability.

A study undertaken by Appuhami, Ranjith entitled “The impact of Firms’ Capital Expenditure on working capital Management:An Empirical Study across Industries in Thailand” year (2008),studied impact of firms’ capital expenditure on their working capital management. The author used the data collected in the Thailand Stock Exchange. The study used Schulman and cox’s(1985) Net Liquidity Balance and Working Capital Requirement as a proxy for working capital measurement and developed multiple regression models. The empirical research found that the firms’ capital expenditure has a significant impact on working capital management. The study also found that the firms’ operating cash flow, which was recognised as a control variable has a significant relationship with working capital management.

A study undertaken by Arunkumar O.N & Radha Ramanan entitled “Working Capital Management and Profitability:A Sensitivity Analysis” year 2013,reveals that the data analysis was carried for 1198 manufacturing firms listed in centre for Monitoring Indian Economy for a period of 5 years. The relationship of debtor’s days, inventory days, creditor days, current ratio, ratio of current liability to total assets, assets turnover ratio, financial assets to total assets and size with return on assets employed is analysed in this study. The authors have applied correlation and group wise weighted least squares regression analysis to identify the effects of these variables on profitability. The correlation analysis shows that the firms profitability is highly influenced by the variables relating to assets.It was also found out that there is a positive relationship between profitability and debtors days and inventory day.

OBJECTIVES THE STUDY

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Since working capital management is one of the most important aspects of

finance, it enables to study in-depth the methods involved in it; so that as a

student of finance it gives me a chance to study the financial perspectives of the

industry. It offers scope to understand various aspects of finance and all these

aspects are reflected in this report.

The estimation of required working capital differs from organization to

organization. So doing this project in an industry will help in knowing more about

the working capital, its preparation and execution.

The study has the following objectives:-

1. To see whether the working capital in “WIPRO LIMITED” and “ITC LIMITED” is an effective one.

2. To find out the extent of the need and adequacy of the working capital of the firm.

3. To see the liquidity position of the company.

4. To see the changes in the working capital.

5. To see the ratio analysis of the two companies.

6. To determine the net working capital.

RESEARCH METHODOLOGY

The collection is the process of enumeration together with the proper recording of results. The success of an enquiry is based up on the proper collection of data.

Secondary Data: Secondary data are those that are already collected by someone for some purpose and are available for the present study. The covers various sources of secondary data including published and unpublished sources like news papers, published books, magazines

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etc…,

DATA TYPE USED: The data required for this project is being collected from various sources which are deemed to be fully accurate and full reliability is there on the data collected. The sources from where the data is collected is from magazines, annual reports, newspaper, published books. STATISTICAL TOOLS USED: Graphs, pie charts and tables.

SAMPLE SIZE OF THE STUDY:

Two:

WIPRO Limited ITC Limited

LIMITATIONS OF THE STUDY

Working capital management is an effective tool for management control. The

following is the limitation which I observed in “WIPRO LIMITED” and “ITC LIMITED”:-

1. Since the report is exclusively made from secondary source of data, the direct observation is literally impossible.

2. There was no scope for gathering sufficient financial information as it is confidential.

3. There was time constraint for the project, due to the limited time

4. They themselves have not maintained the data so accurately but seem to be sufficient for the project.

5. The company’s head office is inaccessible for me. All the data with which the

company’s detail has been mentioned in the project was available to me through

various magazines, annual reports.

CHAPTER PLANNING

The following project has been presented in form of the following chapters:-

Chapter 1: Introduction7 | P a g e

The purpose of Introduction is to provide a basic description of the topic of the project Working Capital and its importance. The background of the subjects builds a platform for the next coming topics to be discussed. The Literature review indicates some related theories to the topic already highlighted which gives importance to the project. Objectives of the study is also defined in here. The methodology shows the steps which has been taken for the completion and development of the project.

Chapter 2: Conceptual Framework

 Conceptual frameworks are abstract representations, connected to the research project's goal that direct the collection and analysis of data (on the plane of observation – the ground).Here, the national and international scenario of corporate social responsibility is shown and through this, analysis can be done about how aware the global world is regarding the subject. The impact amd effect of the topic is also shown.

Chapter 3: Presentation of data, analysis and findings

The process of evaluating data using analytical and logical reasoning to examine each component of the data provided. This form of analysis is just one of the many steps that must be completed when conducting a research experiment. Data of Nestle India from various sources has been gathered, reviewed, and then analyzed to form some sort of finding or conclusion. There are a variety of specific data analysis method, some of which include data mining, text analytics, business, and data visualizations.

Chapter 4: Conclusions and Recommendations

The interpretations are given of the significance of the findings of a research project along with recommendations for action. These recommendations will be based on the research and on any other relevant information available, including own past experience in a market or in business. Conclusions and recommendations usually form an important part of a project brief and of any report or documentation, and are a key part of the value offered to clients by professional market research.

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CHAPTER-2CONCEPTUAL FRAMEWORK

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CHAPTER 2CONCEPTUAL FRAMEWORK

Working capital management is a significant fact of financial management due to the fact that it plays a pivotal role in keeping the wheels of a business enterprise running. The requirements of working capital for day to day business activities cannot be overemphasized. It cannot be denied that a firm invests a part of its permanent capital in fixed assets and keeps a part of it in working capital i.e. for meeting day to day requirements. We will hardly find a firm which does not require any amount of working capital for its normal operation. The requirement of working capital varies from firm to firm depending upon the nature of business, production policy, market conditions, seasonality of operations, conditions of supply etc.

Working capital means the funds (i.e. capital) available & used for day to day operation ( i.e. working) of an enterprise. It consists broadly of that portion of assets of a business which are used in or related to its current operations. It refers to fund which are used during an accounting period to generate a current income of a type which is consistent with major purpose of a firm existence.

The concept of working capital can be explained through two angles:

A) Concept

From the concept point of view, working capital can be defined as gross working capital or net working capital.

Gross Working Capital:- It refers to the firm’s investment in current assets are those assets, which can be converted into cash within an accounting year. Current assets include stock of raw materials, work-in-progress, finished goods, trade debtors, prepayments, cash balances etc.

Net Working capital: - It refers to the difference between current assets and current liabilities. Current liabilities are those claims of outsiders which are expected to mature for payment within an accounting year. Current liabilities include trade creditors, accruals, taxation payable,

A positive working capital means that the company Is able to pay off its short term liabilities. A negative working capital means that the company is unable to meet its short term liabilities.

B) Time:

From, the point of view of time, the working capital can be divided in to two categories namely Fixed and Temporary.

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Permanent working Capital: - It refers to the hard core working capital. It is that minimum level of investment in the current assets that is carried by the business at all times to carry out minimum level of activities.

Example: Every firm has to maintain minimum level of raw materials, WIP and finished goods and cash balance.

Temporary working Capital: - It refers to that part of working capital, which is required by a business over and above permanent working capital. It is also called variable working capital. Since the volume of temporary working capital keeps on fluctuating from time to according to the business activities it may be financed from short term sources.

Example : coca-cola, capital require for special production.

NATIONAL & INTERNATIONAL SCENARIO

NATIONAL SCENARIO

Over the past two decades, India has risen to become the leading destination for global sourcing of IT, BPO and research and development services. Established Indian IT services companies have a proven track record for providing business and technology solutions, offering a large, high quality and English-speaking talent pool, and a friendly regulatory environment. These factors, coupled with strong existing client relationships have facilitated India's emergence as a global outsourcing hub.

According to the NASSCOM Strategic Review Report 2013, the hardware market in India accounted for 40% of the domestic IT industry, with anticipated growth of 1.4% in fiscal2013. The key components of the hardware industry are servers, desktops and laptops, storage devices, peripherals and networking equipment. Increased use of computing devices

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in education and consistent demand from enterprises are key factors driving the continued growth of this market. Additionally, the Government of India is promoting initiatives to provide low cost affordable computing, which is expected to also fuel growth. Increased adoption of virtualization and cloud computing technologies, large-scale digitization and the increased importance of big data or analytics have also contributed to growth in the server and storage markets. Demand for networking equipment is increasing as businesses invest in expanding and upgrading their infrastructure, and as penetration of mobile devices, teleconferencing and voice over internet protocol ("VOIP") increases.

INTERNATIONAL SCENARIO

Working capital management in international context involves managing cash balances, account receivable, inventory, and current liabilities when faced with political, foreign exchange, tax, and liquidity constraints. It also encompasses the need to borrow short-term funds to finance current assets from both in-house banks and external local and international commercial banks. The overall goal is to reduce funds tied up in working capital. This should enhance return on assets and equity. It also should improve efficiency ratios and other evaluation of performance parameters.

The Working capital management is an integral part of the total financial management of an enterprise that has a greater impact on Profitability, Liquidity and Overall performance of the enterprise irrespective of its nature. In fact, working capital is a circulatory money investment that takes place right from the input stage to output. Management of working capital is complicated on account of two important reasons, namely, fluctuating nature of its amount, and a need to maintain a proper balance between current assets and non-current assets in order to maximize profits. The importance of working capital in an industry cannot be over stressed, as it is one of the important causes of success or failure of an industry. Whatever be the size of the business, working capital is its life-blood. Working capital constitutes the funds needed to carry on day to day operations of a business, such as purchase of raw materials, payment of wages and other expenses. For running a business an adequate amount of working capital is essential. A firm with shortage of working capital will be technically insolvent. The liquidity of a business is also one of the key factors determining its propensity to success or failure. This calls for a systematic and integrated approach towards utilizing a company’s assets with maximum efficiency. Working Capital management is about the financial and commercial aspects of purchasing, marketing, inventory, credit, royalty and investment policy.

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CHAPTER-3PRESENTATION, ANALYSIS AND FINDINGS

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CHAPTER-3- PRESENTATION ANALYSIS & FINDINGSCOMPANY PROFILE: WIPRO

Wipro Enterprises Limited (Formerly Azim Premji Custodial Services Private Limited), was incorporated under the Provisions of Companies Act, 1956, is headquartered in Bangalore, India. The Company primarily carries on the businesses of Consumer care products, Domestic & Commercial lighting and Infrastructure engineering which Ire transferred pursuant to the Scheme of Arrangement of Wipro Limited (“Wipro”) with effect from March 31, 2013, with the appointed date as on April 1, 2012.

Wipro Ltd. (NYSE:WIT), a leading global Information Technology, Consulting and Outsourcing company today announced that it has been ranked as a leader in the 'Global R&D Service Provider' survey by Zinnov Management Consulting for the fourth successive year. Zinnov is a leading Globalization and Market Expansion Advisory firm that helps companies globalize their R&D/Product Engineering activities.

"Wipro has consistently kept up pace with changing customer needs in the Product Engineering space. Be it adopting flexible business models, taking a solution led approach or co-investing in developing a product and taking it to market Wipro has demonstrated strong capability. Wipro’s vertical specific solutions and PDLC (Product Development Life Cycle) accelerators give it a definite edge as an engineering partner." said Sundararaman Viswanathan, Engagement Manager, Zinnov Management Consulting Pvt. Ltd.

Wipro Enterprises Limited comprises of two main divisions

1. Wipro Consumer Care and Lighting (WCCLG)

2. Wipro Infrastructure Engineering (WIN)

Wipro Consumer Care and Lighting (WCCLG) is among the top fastest growing FMCG companies in India. It has a strong brand presence in personal care and skin care products in South-East Asia and Middle-East apart from significant market share in identified segments. Today WCCLG has global workforce of 8300 serving over 40 countries.

WCCLG business includes multiple product ranges from Personal care (Soaps, Toiletries), Baby care, Illness Electrical wire devices, Lighting and Modular Office furniture.

Wipro Infrastructure Engineering (WIN) is the largest independent hydraulic cylinder manufacturer in the world, delivering around 2 million cylinders to OEMs in different geographies. WIN has global workforce of over 1,700

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committed and skilled people, and 14 state-of-the-art manufacturing facilities across India, Northern Europe, Eastern Europe, US, Brazil and China.

WIN specializes in designing and manufacturing custom Hydraulic Cylinders (double acting, single acting and telescopic cylinders), Actuators and Precision engineered components for infrastructure and related industries such as Construction & Earthmoving, Material/Cargo Handling & Forestry, Truck Hydraulic, Farm & Agriculture, Mining, and Aerospace & Defense.

Wipro Enterprises Limited also has two associates:

1. Wipro GE Healthcare Private Limited

2. Wipro Kawasaki Precision Machinery Private Limited

Business Products

Wipro Technologies IT Services Product Engineering

Solution Technology Infrastructure

Services Business Process

Outsourcing Consulting Services

Wipro Infotech LTD Notebooks Desktops Servers Data Warehousing IBM Servers

Wipro Consumer Care & Lightning Fast Moving Consumer Goods

Wipro Infrastructure Engineering Construction, Mining, Agriculture, Ports

Wipro GE Medical Systems Medical Systems

Wipro Biomed Life Sciences

Speciality Products

Medical Systems

Managed Services

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DATA ANALYSISBALANCE SHEET-WIPRO LTD

Rs(In Crores)

Particulars 2013-14 2012-13 2011-12 2010-11 2009-10

Liabilities 12 Months 12 Months 12 Months 12 Months 12 Months

Share Capital 492.60 491.70 490.80 295.40 294.50

Reserves & Surplus 23736.90 23860.80 20829.40 17396.80 12220.50

Net Worth 24229.50 24352.50 21320.20 17692.20 12515.00

Secured Loan 50.40 1.00 9.60 .00 .00

Unsecured Loan 3995.60 5242.20 4701.20 5530.20 5013.90

TOTAL LIABILITIES 28275.50 29595.70 26031.00 23222.40 17528.90

Assets

Gross Block 8312.50 8761.60 7740.60 6761.30 5743.30

(-) Acc. Depreciation 4403.10 4111.80 3503.60 3105.00 2563.70

Net Block 3909.40 4649.80 4237.00 3656.30 3179.60

Capital Work in Progress 378.90 301.20 396.40 991.10 1311.80

Investments 10904.20 10335.20 10813.40 8966.50 6895.30

Inventories 320.50 785.10 724.90 606.90 459.60

Sundry Debtors 8499.40 7967.00 5781.30 5016.40 4446.40

Cash and Bank 7800.40 6232.80 5203.30 5664.30 4409.20

Loans and Advances 8893.80 8324.80 6963.50 5425.90 4202.00

Total Current Assets 25514.10 23309.70 18673.00 16713.50 13517.20

Current Liabilities 8792.80 5984.20 5121.20 4874.20 5564.30

Provisions 3638.30 3016.00 2967.60 2230.80 1810.70

Total Current Liabilities 12431.10 9000.20 8088.80 7105.00 7375.00

NET CURRENT ASSETS 13083.00 14309.50 10584.20 9608.50 6142.20

TOTAL ASSETS(A+B+C+D+E) 28275.50 29595.70 26031.00 23222.40 17528.90

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PROFIT AND LOSS-WIPRO LTD

Rs (In Crores)

  Mar'13 Mar'12 Mar'11 Mar'10 Mar'09

  12Months 12Months 12Months 12Months 12Months

INCOME:

Sales Turnover 33226.50 31682.90 26300.50 23006.30 21612.80

Excise Duty .00 .00 .00 84.30 105.50

NET SALES 33226.50 31682.90 26300.50 22922.00 21507.30

Other Income 0 0 0 0 0

TOTAL INCOME 34551.80 32910.30 26981.20 23356.20 21975.50

EXPENDITURE:

Manufacturing Expenses 230.40 233.40 200.50 2286.70 1841.80

Material Consumed 2683.20 4729.80 3774.00 3657.80 3442.60

Personal Expenses 15904.20 13311.50 10937.40 9062.80 9249.80

Selling Expenses .00 .00 .00 378.10 308.40

Administrative Expenses 7475.20 7365.20 5627.70 2035.10 1906.00

Expenses Capitalised .00 .00 .00 .00 .00

Provisions Made .00 .00 .00 .00 .00

TOTAL EXPENDITURE 26293.00 25639.90 20539.60 17420.50 16748.60

Operating Profit 6933.50 6043.00 5760.90 5501.50 4758.70

EBITDA 8258.80 7270.40 6441.60 5935.70 5226.90

Depreciation 701.30 746.10 600.10 579.60 533.60

Other Write-offs .00 .00 .00 .00 .00

EBIT 7557.50 6524.30 5841.50 5356.10 4693.30

Interest 352.40 605.70 136.00 99.80 196.80

EBT 7205.10 5918.60 5705.50 5256.30 4496.50

Taxes 1554.90 1233.50 861.80 790.80 574.10

Profit and Loss for the Year 5650.20 4685.10 4843.70 4465.50 3922.40

Non Recurring Items .00 .00 .00 432.50 -948.60

Other Non Cash Adjustments .00 .00 .00 .00 .00

Other Adjustments .00 .00 .00 .00 .00

REPORTED PAT 5650.20 4685.10 4843.70 4898.00 2973.80

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Preference Dividend .00 .00 .00 .00 .00

Equity Dividend 1724.70 1475.20 1472.60 880.90 586.00

Equity Dividend (%) 350.12 300.02 300.04 300.03 200.00

Shares in Issue (Lakhs) 24629.35 24587.56 24544.09 14682.11 14649.81

EPS - Annualised (Rs) 22.94 19.05 19.73 33.36 20.30

CHANGES IN WORKING CAPITAL STATEMENT FOR THE PERIOD

2009 TO 2014Rs(In Crores)

PARTICULARS2009-10

2010-11

2011-12

2012-13

2013-14

CURRENT ASSETS

-INVENTORIES 459.6 606.9 724.9 785.1 320.5

-SUNDRY DEBTORS 4446.4 5016.4 5781.3 7967.0 8499.4

-CASH&BANK 4409.2 5664.3 5203.3 6232.8 7800.4

A.TOTAL 9315.211287.

611709.

5 14984.916620.3

CURRENT LIABILITIES 7375.0 7105.0 8088.8 9000.2 12431.1

B.TOTAL 7375.0 7105.0 8088.8 9000.2 12431.1

A-B. WORKING CAPITAL 1940.2 4182.6 3620.7 5984.7

4189.2

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EXPLANATION:

The above chart clearly shows the increase in the working capital for the year 2009-2010.All the Current Assets except other current assets have increased in the year 2010 as compared to year 2009. The end result of the statement of changes in working capital after comparing all the increases and decreases is the net decrease in the amount of working capital. The above table prepared focuses on the fact that the increase in working capital is Rs. 2242.4(crores)

The above chart clearly shows the decrease in the working capital for the year 2010-2011.All the Current Assets except receivables have decreased in the year 2011 as compared to year 2010. The end result of the statement of changes in working capital after comparing all the increases and decreases is the net decrease in the amount of working capital. The above table prepared focuses on the fact that the decrease in working capital is Rs. 561.9(crores).

The above chart clearly shows the increase in the working capital for the year 2011-2012. All the Current Assets except other current assets have increased in the year 2012 as compared to year 2011. The end result of the statement of changes in working capital after comparing all the increases and decreases is the net decrease in the amount of working capital. The above table prepared focuses on the fact that the increase in working capital is Rs. 236.4(crores).

The above chart clearly shows the decrease in the working capital for the year 2012-2013.All the Current Assets except receivables have

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decreased in the year 2013 as compared to year 2012. The end result of the statement of changes in working capital after comparing all the increases and decreases is the net decrease in the amount of working capital. The above table prepared focuses on the fact that the decrease in working capital is Rs. 1795.5(crores).

KEY WORKING CAPITAL RATIOS1. CURRENT RATIO : The current ratio is a financial ratio that

measures whether or not a firm has enough resources to pay its debts over the next 12 months. It compares a firm's current assets to its current liabilities. It is expressed as follows:

Current Asset  is an asset  which can either be converted to cash or used to pay current liabilities within 12 months. Current Assets include cash cash equivalents short-term investments, accounts receivable, stock inventory and the portion of prepaid liabilities which will be paid within a year.Current Liabilities are amount that are due to pay within the coming 12 months.The following table shows the current ratio for the years 2008-2009 to 2012-2013:

(Rs. In Crores)Years Current Assets Current

LiabilitiesCurrent Ratio

2008-2009 13517.2 7375.0 1.83 times2009-2010 16713.5 7105.0 2.35 times2010-2011 18673.0 8088.8 2.31 times2011-2012 23309.7 9000.2 2.59 times2012-2013 25514.1 12431.1 2.05 timesInterpretation: The amount of assets is fluctuating for the entire 5 years, where as the amount of liabilities is not much fluctuating in these periods. The current ratio is high for the year 2011-2012,which indicates that the company may not be using its current assets or its short term financing facilities efficiently. This may also indicate problems in working capital management. Highest acceptable current ratio is 2,beyond this the company may face problems. So the company should try to efficiently utilise its resources.

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2. Quick Ratio : Acid-test or quick ratio or liquid ratio measures the ability of a company to use its near cash or quick assets to extinguish or retire its current liabilities immediately. A company with a Quick Ratio of less than 1 cannot currently fully pay back its current liabilities.

The following table shows the quick ratio for the years 2008-2009 to 2012-2013:

(Rs.In Crores)

Years Current Assets

Inventory Current Liabilities

Quick Ratio

2008-2009 13517.2 4596.0 7375.0 1.209 times

2009-2010 16713.5 606.9 7105.0 2.669 times

2010-2011 18673.0 724.9 8088.8 2.218 times

2011-2012 23309.7 785.1 9000.2 2.502 times

2012-2013 25514.1 320.5 12431.1 2.026 times

Interpretation: The company has been able to maintain its quick ratio for the past 5 years and the company is financially secure. It is so that the companies having a quick ratio of greater than 1 are sufficiently able to meet their short term liabilities and a decreasing quick ratio suggest that the company is over leveraged. On the other it is clear that the company is having increasing quick ratio for the year 2009-2009 indicating that a company is experiencing solid top line growth, quickly converting receivables into cash and is being easily able to cover its financial obligations. The company often has faster inventory turnover and cash conversion cycles.

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3. Working Capital Turnover Ratio:Working Capital ratio measures the effective utilization of Working Capital. The ratio establishes relationship between cost of sales and Working Capital. Working Capital Turnover Ratio = Sales / Net Working Capital Where: Net Working Capital = Current Assets - Current Liabilities

The following table shows Working Capital Turnover Ratio for years 2008-2009 to 2012-2013:

(Rs. In Crores)

Years Sales (Rs) Net Working Capital(Rs)

Working Capital Turnover Ratio

2008-2009 21507.3 6142.2 3.501 times

2009-2010 22922.0 9608.5 2.385 times

2010-2011 26300.5 10584.2 2.484 times

2011-2012 31689.2 14309.5 2.215times

2012-2013 33226.5 13083.0 2.539 times

Interpretation:

In the year 2008-2009 the higher is the ratio ie. 3.501 times. It indicates the low investment of working capital and the company plans to attain more profits. But in the year 2010-2011 times, which indicates a higher investment of Working Capital. For the years 2011-2012 and 2012-2013 the sales is comparatively higher than the rest of the years.

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4. RETURN ON CAPITAL EMPLOYEDA financial ratio that measures a company’s profitability and the efficiency with which its capital is employed.Return on Capital Employed(ROCE) is calculated as:ROCE=Earnings Before Interest and Tax (EBIT) / Capital EmployedHere, Capital Employed =Shareholders’ Equity + Debt Liabilities. In the simplified terms it can be stated as Total Assets – Current Liabilities. A higher ROCE indicates more efficient use of capital. ROCE should be higher than the company’s capital cost, otherwise it indicates that the company is not employing its capital effectively and is unable to generate shareholder value.The following table shows Return On Capital Employed for years 2008-2009 to 2012-2013:

(Rs. In Crores)

Years Earnings Before Interest & Taxes (Rs)

Capital Employed(Rs)

Return On Capital Employed(%)

2008-2009 4693.3 17531.9 26.77

2009-2010 5356.1 23226.7 23.06

2010-2011 5841.5 23795.2 24.54

2011-2012 6524.3 26855.3 24.29

2012-2013 7557.5 24582.0 30.74

Interpretation:

In the year 2012-2013 return on capital employed is higher ie. 30.74%.In comparing to previous years the company has been able to generate more revenue. It is been seen that consistently the company is growing faster and as the result the return on capital also increased.

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5. DEBT TO EQUITY RATIO The debt to equity ratio(D/E) is a financial ratio indicating the relative proportion of shareholder’s equity and debt used to finance a company’s assets.Debt to equity ratio can be calculated as follows:D/E=Debt / EquityHere, Debt represents Long Term Debt and Equity=Owners fund +Reserve & surplus-Accumulated Losses.The following table shows Debt to equity ratio for the years 2008-2009 to 20012-2013:

(Rs. In Crores)

Years DEBT (Rs) EQUITY (Rs) DEBT TO EQUITY RATIO

2008-2009 185.8 12514.9 .01

2009-2010 211.9 17692.2 .01

2010-2011 1935.4 21320.2 .09

2011-2012 2191.7 24352.5 .09

2012-2013 59.0 24229.5 .00

Interpretation:In the year the 2010-2011 & 2011-2012 the ratio of debt to equity is .09.A high debt/equity ratio generally means that a company has been aggressive in financing its growth with debt.this may result in volatile earnings a a result of the additional interest expense.So in the company has been able to generate earnings potentially in the above years.

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FINDINGS In financial year March 2009 Current Ratio and Quick Ratio is low

compared to March 2010 which is not good for working capital as it implements more liabilities than current asset as cash cycle and collection is weak. Working Capital Turnover ratio is high in March 2009 as compared to March 2010 which implements that the management is being efficient in using a firm’s short term assets and liabilities to support sales in march 2009.

In financial year Mar’10 Current Ratio and Quick Ratio is high compared to Mar’11 which is good for working capital as it involves cash cycle. Working Capital Turnover ratio is low in March 2010 as compared to March 2011 which implements business is investing in too many accounts receivables which would lead to an excessive amount of bad debts and obsolete inventory,which is not good for business

In financial year Mar’11 Current Ratio and Quick Ratio is low compared to Mar 12 which is not good for working capital as it implements more liabilities than current assets as cash cycle and collection is weak. Working Capital Turnover ratio is high in March 2011 as compared to March 2012 which implements that the management is being efficient in using a firm’s short term assets and liabilities to support sales in March 2011

In financial year Mar’12 Current Ratio and Quick Ratio is high compared to Mar’13 which is good for working capital as it involves cash cycle. Working Capital Turnover ratio is low in March 2012 as compared to March 2013 which implements business is investing in too many accounts receivables which would lead to an excessive amount of bad debts and obsolete inventory, which is not good for business.

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COMPANY PROFILE: ITC LIMITED

a. Name of the Company – ITC LIMITED

b. Founded – August 24, 1910 (as Imperial Tobacco Company of India)

c. Founder – Henry Overton Wills

d. Headquarters – Virginia House, 37 , Jawaharlal Nehru Rd, Kolkata-700 071

e. Board of Directors –

Yogesh Chander Deveshwar Chairman, CEOA K Rajput Senior Vice President- Corporate AffairsAngara Venkata Girija Kumar Non Executive DirectorAnil Baijal Non Executive DirectorAnthony Ruys Non Executive DirectorArif Nazeeb Vice PresidentM S Bhatnagar Vice PresidentR K Rai Chief Operating Officer S Janardhana Reddy Executive Vice President Pradeep Vasant Dhobale Executive Director

3.2 Data Analysis and Interpretation

Presentation of Data Profit & loss of ITC Ltd. Balance Sheet of ITC Ltd.

Analysis and Findings Ratio Analysis Changes in Working Capital Net working Capital

RATIO ANALYSIS

SHORT TERM SOLVENCY RATIO

Current Ratio = TotalCurrent Assets

TotalCurrent Liabilities (Rs. IN CRORES)

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Particulars 2011-12 2012-13 2013-14Total Current

Assets 11395.32 14260.01 16097.49

Total Current Liabilities 10519.67 11663.18 12916.23

Current Ratio 1.083 1.223 1.246

2011-12 2012-13 2013-141.000

1.050

1.100

1.150

1.200

1.250

1.300

1.083

1.2231.246

Current Ratio

Current Ratio

Interpretation : Standard current ratio is 2:1. From the above table, I see that Current Ratio is increasing. It means that Solvency Position is better.

Acid Test Ration = Quick Assets

Quick Liabilities

Here, Quick Assets = Sundry Debtors + Cash at Bank + Loans & Advances

(Rs. IN CRORES)

Particulars 2011-12 2012-13 2013-14Quick Assets 3079.06 7659.81 8737.95

Quick Liabilities 10519.67 11663.18 12916.23Acid Test Ratio 0.293 0.657 0.677

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2011-12 2012-13 2013-140.000

0.100

0.200

0.300

0.400

0.500

0.600

0.700

0.800

0.293

0.657 0.677

Acid Test Ratio

Acid Test Ratio

Interpretation : Acid Test Ratio shows that measurement of Short term Solvency Position of the Company. It will be always 1:1 as Standard Ratio. But from the above table I see that, Acid Test Ratio is below 1:1 in every year. This is not sound liquidity position of the company.

Working Capital Turnover Ration = Net Sales

NetWorking Capital

Here net Working Capital = Net Current Assets

(Rs. IN CRORES)

Particulars 2011-12 2012-13 2013-14Net Sales 25090.11 29901.27 33238.60

Net Working Capital 875.65 2596.83 3181.26Working Capital Turnover Ratio 28.653 11.515 10.448

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2011-12 2012-13 2013-140.000

5.000

10.000

15.000

20.000

25.000

30.000

35.000

28.653

11.51510.448

Working Capital Turnover Ratio

Working Capital Turnover Ratio

Interpretation : A high working capital turnover ratio indicates efficiency in utilization of resource. In the year 2011-12 we see that, highest working capital exist it shows that, component of working capital is less utilized. In the 2012-13 & 2013-14 I see that, working capital turnover ratio has decreased. This means that component of working capital is more utilized which is considered as the negative sign from the point view of finance.

LONG TERM SOLVENCY RATIO

Debt Equity Ratio = Total Debt

Share Holders Fund

Here, Total debt= Secured Loans + Unsecured Loans+ Total Current Liabilities

Share Holders Fund = Net Worth (Rs. IN CRORES)

Particulars 2011-12 2012-13 2013-14Secured Loans 1.77 0 0.14

Unsecured Loans 77.32 66.40 51Total Current

Liabilities 10019.67 11663.18 12916.23Total Debt 10098.8 11729.6 12967.4

Share Holders Fund 18738.84 22287.85 26252.02Debt Equity Ratio 0.539 0.526 0.494

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2011-12 2012-13 2013-140.470

0.480

0.490

0.500

0.510

0.520

0.530

0.540

0.550

0.539

0.526

0.494

Debt Equity Ratio

Debt Equity Ratio

Interpretation : The Debt Equity Ratio is 1:1. It implies that for every rupee of outside liability equal to every rupee of shareholder fund. From the above table I see that debt equity ratio gradually decreases from 0.539 to 0.526 and from 0.526 to 0.494. It shows that debt capital decreases. This position is better for the

company.

Proprietary Ratio = Shareholders Fund

Total Assets

Here , Shareholders Fund = Net Worth (Rs. IN CRORES)

Particulars 2011-12 2012-13 2013-14Shareholders Fund 18738.84 22287.85 26262.02

Total Assets 18817.93 22354.25 26313.16Proprietary Ratio 0.996 0.997 0.998

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2011-12 2012-13 2013-140.994

0.996

0.998

1.000

0.996

0.997

0.998

Proprietary Ratio

Proprietary Ratio

Interpretation : Normal ratio of proprietary ratio is 1:1. It is seen that the company’s total shareholders fund approximately equal to total assets. It is the standard position of business.

PROFITABILITY RATIO

Net Profit Ratio = Net Profit

Sales X 100

(Rs. IN CRORES)

Particulars 2011-12 2012-13 2013-14Net Profit 6162.37 7418.39 8785.21

Sales 35247.25 29901.27 33238.6Net Profit Ratio 17.48% 24.81% 26.43%

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17.48%

24.81%

26.43%

Net Profit Ratio

2011-122012-132013-14

Interpretation : Net profit ratio will be normally created by every company 5-10%. But from the above table I see that company’s net profit is more than 10% and gradually increased every year. This is the good position of the company.

Operating Profit Ratio = OperatingProfit

Net Sales X 100

(Rs. IN CRORES)

Particulars 2011-12 2012-13 2013-14Operating Profit 8921.81 10627.51 12454.84

Net Sales 25090.11 29901.27 33238.60Operating Profit Ratio 35.559% 35.542% 37.471%

Interpretation : In 2011-12 and 2012-13 Operating Profit ratio almost same. In 2013-14 Operating Profit Ratio has gradually increased to 37.471%. It is the best position in efficiency.

ACTIVITY RATIO

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Debtors Collection Period = Average Debtors

Net Sales

X 365 days

Here Average debtor for 2011-12 = 986.02

For 2012-13 =

(986.02+1163.34)/2 = 1074.68

For 2013-14 = (1163.34+2165.36)/2 = 1664.35

(Rs. IN CRORES)

Particulars 2011-12 2012-13 2013-14Average Debtors 986.02 1074.68 1664.35

Net Sales 25090.11 29901.27 33238.60Debtors Collection Period 14 13 18

2011-12 2012-13 2013-140

2

4

6

8

10

12

14

16

18

20

14 13

18

Debtors Collection Period

Debtors Collection Period

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35.559%

35.542%

37.471%

Operating Profit Ratio

2011-122012-132013-14

Interpretation : There is in both average debtors and sales. But average collection period decreases in 2012-13 and increases in 2013-14. This shows, that cash collection from debtors is not very good.

Total Assets Turnover Ratio = Net Sales

Total Assets

(Rs. IN CRORES)

Particulars 2011-12 2012-13 2013-14

Net Sales 25090.11 29901.27 33238.60

Total Assets 18817.93 22354.25 26313.16

Total Assets Turnover Ratio 1.33 1.34 1.26

2011-12 2012-13 2013-141.22

1.24

1.26

1.28

1.30

1.32

1.34

1.36

1.33 1.34

1.26

Total Assets Turnover Ratio

Total Assets Turnover Ratio

Interpretation : From the above table I see that, total assets turnover ratio has firstly increased and then decreased. It shows that position of the company is slightly good. Its stability position is not very good.

Fixed Assets Turnover Ratio = Net Sales¿ Assets

Where Fixed Assets = Net Block. (Rs. IN CRORES)

Particulars 2011-12 2012-13 2013-14

Net Sales 25090.11 29901.27 33238.60

Fixed Assets 9053.63 11209.34 12012.74

Fixed Assets Turnover Ratio 2.77 2.67 2.77

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2011-12 2012-13 2013-142.60

2.62

2.64

2.66

2.68

2.70

2.72

2.74

2.76

2.78

2.77

2.67

2.77

Fixed Assets Turnover Ratio

Fixed Assets Turnover Ratio

Interpretation : From the above table I see that, Fixed Assets Turnover ratio is firstly increases and then it decreases. It shows that position of the company is slightly good.

Current Assets Turnover Ratio = Net Sales

Current Assets

(Rs. IN CRORES)

Particulars 2011-12 2012-13 2013-14

Net Sales 25090.11 29901.27 33238.60

Current Assets 11395.32 14260.01 16097.49

Current Assets Turnover Ratio 2.20 2.10 2.06

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2011-12 2012-13 2013-141.95

2.00

2.05

2.10

2.15

2.20

2.25

2.20

2.10

2.06

Current Assets Turnover Ratio

Current Assets Turnover Ratio

Interpretation : Better current turnover ratio is always good for the company. The turnover ratio is moving positively in the last three years. There was increase in current assets as well as in sales. But growth rate of sales were higher. But the Current Asset Turnover Ratio is gradually decreased.

NET WORKING CAPITAL

STATEMENT SHOWING NET WORKING CAPITAL

(Rs. IN CRORES)

Particulars 2011-12 2012-13 2013-14

(A)CURRENT ASSET

(a) Inventories 5637.83 6600.20 7359.54

(b) Sundry Debtors 986.02 1163.34 2165.36(c) Cash & Bank 140.50 3615 3289.37(d) Loans & Advances 1952.54 2881.47 3283.22

Total (A) 8716.89 14260.01 16097.49(B)CURRENT LIABILITIES

(a) Current Liabilities 6108.60 6404.43 6921.52(b) Provisions 4411.07 5258.75 5994.71

Total (B) 10519.67 11663.18 12916.23NET WORKING CAPITAL (A-B) -1802.78 2596.83 3181.26

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PROFIT & LOSS STATEMENT and BALANCE SHEET:

Profit & Loss account of ITC ------------------- in Rs. Cr. -------------------

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Balance Sheet of ITC -------- in Rs. Cr. ------------

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Mar '14 Mar '13 Mar '12

12 mths 12 mths 12 mths

Income

Sales Turnover 33,238.60 29,901.27 35,247.25Excise Duty 0.00 0.00 10,157.14Net Sales 33,238.60 29,901.27 25,090.11Other Income 1,107.14 938.70 761.25Stock Adjustments 128.41 935.83 149.30Total Income 34,474.15 31,775.80 26,000.66

Expenditure

Raw Materials 13,522.04 12,531.44 9,933.19Power & Fuel Cost 613.19 550.11 453.19Employee Cost 1,608.37 1,387.01 1,265.41Other Manufacturing Expenses 0.00 0.00 634.80Selling and Admin Expenses 0.00 0.00 2,691.41Miscellaneous Expenses 5,168.57 5,741.03 1,339.60Preoperative Exp Capitalised 0.00 0.00 0.00Total Expenses 20,912.17 20,209.59 16,317.60

Mar '14 Mar '13 Mar '1212 mths 12 mths 12 mths

Operating Profit 12,454.84 10,627.51 8,921.81PBDIT 13,561.98 11,566.21 9,683.06Interest 2.95 86.47 87.02PBDT 13,559.03 11,479.74 9,596.04Depreciation 899.92 795.56 698.51Other Written Off 0.00 0.00 0.00Profit Before Tax 12,659.11 10,684.18 8,897.53Extra-ordinary items 0.00 0.00 2.51PBT (Post Extra-ord Items) 12,659.11 10,684.18 8,900.04Tax 3,873.90 3,265.79 2,737.08Reported Net Profit 8,785.21 7,418.39 6,162.37Total Value Addition 7,390.13 7,678.15 6,384.41Preference Dividend 0.00 0.00 0.00Equity Dividend 4,771.91 4,148.46 3,518.29Corporate Dividend Tax 810.99 705.03 570.75

Per share data (annualised)

Shares in issue (lakhs) 79,531.83 79,018.33 78,184.24Earning Per Share (Rs) 11.05 9.39 7.88Equity Dividend (%) 600.00 525.00 450.00Book Value (Rs) 33.02 28.21 23.97

Mar '14 Mar '13 Mar '12

12 mths 12 mths 12 mths

Sources Of Funds

Total Share Capital 795.32 790.18 781.84Equity Share Capital 795.32 790.18 781.84Share Application Money 0.00 0.00 0.00Preference Share Capital 0.00 0.00 0.00Reserves 25,466.70 21,497.67 17,957.00Networth 26,262.02 22,287.85 18,738.84Secured Loans 0.14 0.00 1.77Unsecured Loans 51.00 66.40 77.32Total Debt 51.14 66.40 79.09Total Liabilities 26,313.16 22,354.25 18,817.93

Mar '14 Mar '13 Mar '1212 mths 12 mths 12 mths

Application Of Funds

Gross Block 18,239.65 16,679.17 13,926.34Less: Revaluation Reserves 0.00 0.00 53.05Less: Accum. Depreciation 6,226.91 5,469.83 4,819.66Net Block 12,012.74 11,209.34 9,053.63Capital Work in Progress 2,295.73 1,487.79 2,572.06Investments 8,823.43 7,060.29 6,316.59Inventories 7,359.54 6,600.20 5,637.83Sundry Debtors 2,165.36 1,163.34 986.02Cash and Bank Balance 3,289.37 3,615.00 140.50Total Current Assets 12,814.27 11,378.54 6,764.35Loans and Advances 3,283.22 2,881.47 1,952.54Fixed Deposits 0.00 0.00 2,678.43Total CA, Loans & Advances 16,097.49 14,260.01 11,395.32Deferred Credit 0.00 0.00 0.00Current Liabilities 6,921.52 6,404.43 6,108.60Provisions 5,994.71 5,258.75 4,411.07Total CL & Provisions 12,916.23 11,663.18 10,519.67Net Current Assets 3,181.26 2,596.83 875.65Miscellaneous Expenses 0.00 0.00 0.00Total Assets 26,313.16 22,354.25 18,817.93Contingent Liabilities 1,916.00 2,122.83 2,533.61Book Value (Rs) 33.02 28.21 23.97

Interpretation : This table shows the net working capital position for the last three years. In the year 2011-’12 net working capital shows in negative. It indicates that the ability of the ITC company to meet the short term obligation is very poor. Whereas in the year 2012-’13 & 2013-’14 net working capital is positive.

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It indicates that the ability of the ITC company to meet the short term obligation is high and creditor accept net working capital as margin of safety and it indicates that the financial solvency position of the company.

Findings:

(i) Since volume of sales is increased. So, company’s earning will also be increased.(ii) Standard current ratio is 2:1 but company ratio is 1.24:1. This shows company’s solvency position

is not so good.(iii) Standard asset test ratio is 1:1 but company’s ratio is 0.67:1. The company has not excess liquidity.(iv) The debtors of the company were high. They were increasing year by year. So more funds were

blocked in debtors. But now recovery is becoming slowly and steadily.(v) Working capital turn over ratio is decreasing in 2013-’14, that shows decreasing needs of working

capital.(vi) Asset turn over ratio is gradually increased is shows that company’s stability position is better.

Suggestions:(i) It can be said that over all financial position of the company is very good from the point of view of

profitability.(ii) The company should try to increase their shareholders fund over the total assets.(iii) Since operating profit ratio is high so the company must try to more increase in sale.(iv) Company should try to increase the volume of sales to occupy the major area of the market.

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CHAPTER-4CONCLUSIONS AND RECOMMENDATIONs

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CHAPTER-4CONCLUSION AND RECOMMENDATIONS

WIPRO:The management of working capital plays a vital role in running of a successful business. So, things should go with proper understanding for managing cash receivables and inventory.

WIPRO LIMITED is managing its working capital in a good manner but still there is scope for improvement in its management. This can help the company in raising its profit level by making less investment in accounts receivables and stock etc. This will ultimately improve the efficiency of its operations. Following are few recommendations given to the company in achieving its desired objectives.

The business runs successfully with adequate amount of the working capital but the company should see to it that cash should not be tied up in excessive amount of working capital.

Though the present system is mostly perfect, the company as due to the increasing sales should adopt more effective measures so as to counter the treat.

The investment of cash in marketable securities should be increased as it is very profitable for the company.

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Holding of excessive and insufficient stock must be avoided as it creates a burden on the cash resources of a business and results in lost sales, delays for customers etc respectively.

ITC LIMITED:With the best of my efforts, the guidance of my supervisor and the information based on ITC Company, I have completed this project report of my working capital management. I have carryout detailed information of ITC Company.

The acid test ratio shows the short term solvency position of the company. The average debtors and sales are both increasing but still cash collection from debtors is not so good. The debt equity ratio shows that company is in fairly better position. The net profit 0f the company is also good since it exceeds 10% and is gradually increasing every year. The working capital of the company is reducing which is considered from the point of view of finance. From the above collected data, I may say the ITC Company is in good position in market.

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BIBLIOGRAPHY

BOOK NAME AUTHOR

FINANCIAL MANAGEMENT Shashi K. Gupta

&

R.K. Sharma

FINANCIAL MANAGEMENT I.M. Pandey

ACCOUNTING FOR MANAGEMENT T. Ramachandran

MANAGEMENT ACCOUNTING R.S.N. Pillai

&

Bagavathi

Data are collected from Annual Reports of WIPRO LIMITED & ITC LIMITED.

INTERNET:

www.moneycontrol.com/financials/itc/ .. www.moneycontrol.com/india/financialstatement/itc .. En.m.wikipedia.org/wiki/ITC limited

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