Introduction

Of Working Capital

Meaning:

Working capital could be defined as the portion of assets used in current operations.
The movements of the funds from capital to income and profits and back to working capital
are one of the most important characteristics of the business. This cyclical operation is
concerned with utilization of the funds with the hope that will return with an additional
amount called income. If the operations of the company are to run smoothly, a proper
relationship between fixed capital and current capital has to maintain.

Sufficiently liquidity is important and must be achieved and maintained to provide that funds
to pay off obligation as they arise.

The adequacy of cash and other current assets together with their efficient handling,
virtually determine the survival o demise of the company. A businessman should be able to
judge the accurate requirement of working capital and should be quick enough to raise the
enquired funds to finance he working capital needs.

Working capital is also called as net current assets, it is the excess of current assets over
current liabilities. All organization has to carry working capital. It is important from the point
of view of both liquidity and profitability. Poor management of working capital means that
funds that unnecessarily tied up in idle assets hence educing liquidity and also reducing
ability to invest in productive assets such as plant and machinery. So affecting profitability.

The term working capital refers to current assets, which may be defined as:

Those which are convertible into cash or equivalents with the period of one year and

Those which are required to meet day to day operations,

The fixed as well as current assets, both requires investment of Funds. So the
management of working capital and fixed assets apparently seem to involve it type of
consideration but it is no so. The management of working capital involve different concept
and methodology than the techniques used in fixed assets management.
 1. REVIEW OF LITERATURE

Working capital typically means the firms holdings of current, or short term assets such as
cash, receivables, inventory and marketable securities. Much academic literature is
directed towards gross working capital, i.e. total current or circulating assets. These items
are referred to as circulating assets because of their cyclical nature. The goal of working
capital management is to manage the firms current assets and current liabilities in such a
way that a satisfactory level of working capital is maintained.

In the words of Shubin, Working capital is the amount of funds necessary to cover the
cost of operating the enterprise.

According to Genestenberg, Circulating capital means current assets of the company that
are changed in the ordinary course of business from one to another, as for example, from
cash to inventories, inventories to receivables, receivables into cash.

Economists like Mead, Malott, Baker and Field says that it is found that the excess of
current assets over current liabilities is the amount that is normally available to finance
current operations. They feel that current assets should be considered as working capital,
as the whole of it helps to earn profits; and the management is more concerned with the
total current assets as they constitute the total funds available for operational purposes. On
other hand, economists like Lincoln and Saliers uphold the former view. They argue that:

(A) Balance Sheet Concept

Gross working capital (capital invested in total current assets of an enterprise)

Net working capital

Net working capital = Current Assets Current Liabilities

(B) Operating Cycle or Circular Flow Concept

2. RESEARCH METHODLOGY

Research Design is advance planning of the methods to be adopted for collecting data and
techniques used. The present study has been carried out to depict the process of working
capital management of FEDREL MOGUL BEARING . For this purpose the relevant data of
3 years have been collected. The efficiency of working capital management has been
evaluated with the help of the following research design.

a) Need and significance of the study:

Power is the backbone for economic development. In our project we are doing study of
working capital management of the FEDREL MOGUL BEARING .This study will tell us
about the financial condition of the FEDREL MOGUL BEARING.

Working capital is the life blood of any business. As circulation of blood is essential in
human body, working capital is also very essential to maintain the smooth running of
business. No business can run successfully without an adequate amount of working
capital.

The need for working capital cannot be over emphasized. Every business needs some
amount of working capital. The need for working capital arises due to the time gap between
production & realization of cash from sales.

There is an operating cycle involved in the sales & realization of cash. There are time gaps
in purchase of raw material & production, production and sales and realization of cash, for
which it is necessary to maintain the adequate amount of working capital.

b) Objective of the study:

Working capital management of FEDREL MOGUL BEARING is studied to know about the
financial condition of the FEDREL MOGUL BEARING, which is one main aim of the study.
Some of the other objectives of the study of working capital management of FEDREL
MOGUL BEARING are given below:

To depict the process of working capital management.

2. To evaluate the efficiency of the working capital following objectives have been framed:--

a) To study the inventory management.

 b) To study the receivable management.

c) To study the cash management.

3. To suggest some ideas to improved the efficiency of the working capital management.

c) Scope of the study:

FMBIL is a leading automobile component manufacturer in India. Of the 600 plus

manufacturers in the country, it has been the most dynamic in adapting to the changing
environment. It is in depth knowledge of the auto component industry and high
management competence has helped it to remain a market leader in terms of
manufacturing efficiency as well as quality control. It is guided by the well set vision backed
by its philosophy and beliefs, the vision being to be No. 1 auto component manufacturing
group in India by the year 2003 with a sales turnover of $500 million (app. Rs. 2000 Crores)
with export accounting for 30% of total sales.

. In our study of working capital management of FEDREL MOGUL BEARING we have used
only the financial aspects of the industry.

D) Data collection:

For the purpose of this study, the data and information collected are based on Secondary
Sources only. The secondary sources of data are:

Annual reports of last three years (2007-2009)

Manual of concerned departments(2007-2009)

Internet sites : www.fedrel mogul bearing.nic.in

E) Method used:

Financial statements are multifunctional tools to meet the requirements of several users
both from within and outside the business. These aspects are exhibited by profits or loss,
Net Working Capital and net worth respectively. After presenting the data in various forms
for the purpose of analysis, the research tools have been used to depict the process of
Working Capital Management.

Methods of quantitative analysis:

Schedule of working capital management.

Change in the composition of currents assets and current liabilities.

Ratio analysis

Operating cycle and cash cycle

Cash flow analysis

Statistical tools like graphical presentation

So all these financial tools are used for analyze the working capital management of the
FEDREL MOGUL BEARING.

3. TENTATIVE CHAPTERS

CHAPTER 1

Introduction

CHAPTER 2

Review of Literature

CHAPTER 3

Research methodology

CHAPTER 4

Working Capital Management

CHAPTER 5

Analysis and Interpretation of data

CHAPTER 6

Conclusion and suggestions

CHAPTER 7

Bibliography
4. BIBLOGRAPHY

I.M. Pandey , Financial Management.

M Y Khan and P K Jain , Financial Management.

V.K. Bhalla , Financial Management and Policy

Shashi K. Gupta and R.K. Sharma , Financial Management.

www.fedrel mogul bearing.nic.in

Excise Manual by R.K Jain

Commercial Department by Manoj Dhok

Financial Management by Khan & Jain

Financial Management by S.N Maheshwari