TABLE OF CONTENTS

CHAPTER TITLE PAGE NO.

ABSTRACT 6
LIST OF FIGURES 7
LISTA OF TABLES 8
1 WORKING CAPITAL 9
1.1 Introduction
1.2 Working Capital Management
1.3 Operating Cycle
1.4 Concept Of Working Capital
1.5 Objectives
1.6 Importance
1.7 Working Capital Analysis
2 RESEARCH METHODOLOGY 19
2.1 What is Research
2.2 Types of Research
2.3 Objectives of the study
2.4 Limitations of the study
2.5 Statement of Problem
2.6 Review of Literature
2.7 Research Design
2.8 Sampling Design
2.9 Data Collection
3 COMPANY PROFILE 29
3.1 Introduction
3.2 Vision & Mission
3.3 Milestones
3.4 SWOT Analysis
3.5 Drivers of S.J Engineering Future Growth
3.6 Products of S.J. Engineering.
3.7 Financial Performance of Company
4 DATA ANALYSIS AND INTERPRETATIONS 37
5 FINDINGS AND SUGGESTIONS 45
6 CONCLUSION 47
BIBLIOGRAPHY 48
ANNEXURE : Questionnaire 49
6
 LIST OF FIGURES

NO. TITLE PAGE

NO.
1.1 Operating Cycle Of Manufacturing Business 13

1.2 Concept Of Working Capital 14

3.1 Clients of S.J. Engineering 33

4.1 Profession of Respondents 38

4.2 Gender of Respondents 39

4.3 Education of Respondents 40

4.4 Graphical Representation Of Level Of Importance Of Working 41

Capital Management In The Organization

4.5 Credits of Respondents 42

4.6 Credits of Respondents 43

4.7 Company Reminding Customers To Pay The Balance Amount 44

of Respondents

7
 LIST OF TABLES

NO. TITLE PAGE

NO.
2.1 Sample Size Distribution 28

3.1 Clients of S.J. Engineering 32

4.1 Profession of Respondents 38

4.2 Gender of Respondents 39

4.3 Education of Respondents 40

4.4 Experience of Respondents 41

4.5 Credits of Respondents 42

4.6 Credits of Respondents 43

4.7 Company Reminding Customers To Pay The Balance Amount 44

of Respondents

8
 CHAPTER 1

WORKING CAPITAL

INTRODUCTION

Every business whether big, medium or small, needs finance to carry on its
operations and to achieve its target. In fact, finance is so indispensable today that its
rightly said to be the lifeblood of an enterprise. Without adequate finance, no enterprise
can possibly accomplish its objectives. So this chapter deals with studying various
aspects of working capital management that is necessary to carry out the day-to-day
operations. The term working capital refers to that part of firm’s capital which is required
for financing short term or current assets such as cash, marketable securities, debtors
and inventories funds invested in current assets keep revolving fast and are being
constantly converted in to cash and this cash flows out again in exchange for other
current assets. Hence it is known as revolving or circulating capital. On the whole,
Working Capital Management performs a key function and is of top priority for every
finance manager. All managers must, however, keep in mind that n their pursuit to
liquidity, they should not lose sight of these basic goal of profitability. They should be
able to attain a judicious mix of liquidity and profitability while managing their working
capital.

Working capital management deals with the most dynamic fields in finance,
which needs constant interaction between finance and other functional managers. The
finance manager acting alone cannot improve the working capital situation. In recent
times a few case studies regarding management of working capital in selected
companies have been in order to make in-depth analysis of the several experts of
working capital management, The finding of such studies not only throws new lights on
the technical loopholes of management activities of the concerned companies, but also
helps the scholars and researchers to develop new ideas techniques and methods for
effective management of working capital.

Decisions relating to working capital and short term financing are referred to as
working capital management. These involve managing the relationship between a
firm's short-term assets and its short-term liabilities. The goal of working capital
management is to ensure that the firm is able to continue its operations and that it has
sufficient cash flow to satisfy both maturing short-term debt and upcoming operational
expenses.
9
 WORKING CAPITAL MANAGEMENT

In simple terms working capital means is that the amount of funds that a
company require finance for its day-to-day operations. Working capital states that the
period of debtors, receivables etc for a company to raise finance from them at the
earliest. Finance manager should develop sound techniques of managing current
assets.

Working capital management involves managing the relationship between a

firm's short-term assets and its short-term liabilities. The goal of working capital
management is to ensure that the firm is able to continue its operations and that it has
sufficient cash flow to satisfy both maturing short-term debt and upcoming operational
expenses.

The following should be effective in working capital management:

Cash management: Identify the cash balance which allows for the business to meet
day to day expenses, but reduces cash holding costs.

Inventory management: Identify the level of inventory which allows for uninterrupted
production but reduces the investment in raw materials—and minimizes reordering
costs—and hence increases cash flow. Besides this, the lead times in production
should be lowered to reduce Work in Process (WIP) and similarly, the Finished
Goods should be kept on as low level as possible to avoid over production.

Debtor’s management: Identify the appropriate credit policy, i.e. credit terms,
discounts etc. which will attract customers, such that any impact on cash flows and
the cash conversion cycle will be offset by increased revenue and hence return on
Capital. Debtor’s credit period should be less than 90 days to achieve good working
capital ratio and position of the company.

10
 OPERATING CYCLE

The operating cycle is the average period of time required for a business to
make an initial outlay of cash to produce goods, sell the goods, and receive cash from
customers in exchange for the goods. If a company is a reseller, then the operating
cycle does not include any time for production - it is simply the date from the initial
cash outlay to the date of cash receipt from the customer.

The operating cycle is useful for estimating the amount of working capital that
a company will need in order to maintain or grow its business. A company with an
extremely short operating cycle requires less cash to maintain its operations, and so
can still grow while selling at relatively small margins. Conversely, a business may
have fat margins and yet still require additional financing to grow at even a modest
pace, if its operating cycle is unusually long.

In case of a manufacturing company, the operating cycle is the length of time

necessary to complete the following cycle of events –

 Conversion of cash into raw materials

 Conversion of raw materials into work-in-progress
 Conversion of work-in-progress into finished goods
 Conversion of finished goods into accounts receivables
 Conversion of accounts receivable into cash

The above operating cycle is repeated again and again over the period depending
upon the nature of the business and type of product etc. the duration of the operating
cycle for the purpose of estimating working capital is equal to the sum of duration
allowed by the suppliers.

11
Fig1.1: Operating Cycle Of Manufacturing Business

12
 CONCEPT OF WORKING CAPITAL

Concept of Working
Capital

Gross Working Capital Net Working Capital

Fig.1.2: Concept Of Working Capital

The concept of working capital includes current assets and current

liabilities both. There are two of working capital they are gross and net
working capital.

1. Gross working capital: Gross working capital refers to the firm’s

investment in current assets. Current assets are the assets, which can be
converted into cash within an accounting year or operating cycle. It includes
cash, short term securities debtors (account receivables or book debts), bills
receivables and stock (inventory).

2. Net working capital: Net working capital refers to the difference between
current assets and liabilities are those claims of outsiders, which are
expected to mature for payment within an accounting year. It includes
creditors or accounts payables bills payable and outstanding expenses.
Networking copulate can be positive or negative. A positive working capital
will arise when current assets exceed current liabilities and vice versa.

13
 OBJECTIVES

Every company has their own objectives of working capital that is they
try to keep company position at upper level through working capital. Company
may get good position by giving less credit period to debtors, receivables,
etc. and by taking more credit period from creditors, payables etc. Its main
objective is to get back cash in short term period and meets company’s day
to day operations. Effective working capital helps a company to borrow
short term funds and long term funds from public, banks, investment banking
and financial institutions.

The overall financial management objectives of an organization could be

summarized in terms of the following five objectives:
 To ensure that the organization always has enough cash to meet its
legal obligations and avoid illiquidity- that is, to maintain adequate
short-term financial flexibility.
 To arrange to obtain whatever funds are required from external
sources at the right time, in the right form, and on the best possible
terms.
 To ensure that the organization’s assets and liabilities – current and
long-term, financial and operating are utilized as effectively as
possible.
 To forecast and plan for the financial requirements of future operations.
 To make all decisions and recommendations on the basis of one
primary criterion: maximizing the long-term value of the organization.
This objective is attained in a publicly owned corporation through
maximization of the wealth of the owners (stockholders) by maximizing
stock price.

The last point is particularly important; without this requirement, financial

executives could find many suboptimal solutions to problems. It would be
easy, for example, to satisfy the first requirement by maintaining enormous
cash balances or investing very large sums in readily salable short –term
securities; but such a policy would normally not be in the best interests of the
stockholders of a typical corporation.

14
 IMPORTANCE

Proper management of working capital is very important for the

success of an enterprise. “It aims at protecting the purchasing power of
assets and maximizing the return on Investment. The manager of
administration of current assets to a very large extent determines the success
of the operations of a firm. Constant management is required to maintain
appropriate levels in the various working capital accounts. A study of working
capital is of major importance to internal and external analysis because of its
close relationship to current day-to-day operations of business, Inadequacy
or mismanagement of working capital is the leading cause of business
failures. Shortage of working capital, so often advanced as the main cause of
failure of Industrial concerns, is nothing but the clearest evidence of
mismanagement, which is so common. The current assets and current
liabilities flow round in a business like an electric current. The working capital
plays the same role in the business as the role of the heart in the human
body. Just as the heart gets blood and circulated the same in the body, in the
same enterprise, adequate amount of working capital is pre-requisite. The
adequacy of cash and current assets together with their efficient handing
virtually determine the survival or demise of a concern. Inadequate working
capital is a business ailment as compared to the availability of excess working
capital may lead carelessness.

About costs and therefore, to inefficiency of operations. Many a times

business failure takes place due to lack of working capital. If a concern
maintains an adequate amount of working capital, it enjoys a good credit
rating and gets discount on payment. It will ensure proper functioning of the
business operations and help in the maximization of threat of return. A
business house can maximize its rate of return on the capital invested provide
in keeps pace with the scientific and technological developments taking place
in the field to which it pertains. As soon as some technological and scientific
development takes place, a business enterprise in order to accelerate its
profitability should immediately introduce the same to its productive process.
In reality, however the sufficiency of working capital will determine the course
of decision in this regard.

Working capital helps to operate the business smoothly without any

financial problem for making the payment of short-term liabilities. Purchase of
raw materials and payment of salary, wages and overhead can be made
without any delay. Adequate working capital helps in maintaining solvency of
15
the business by providing uninterrupted flow of production. Quick payment of
credit purchase of raw materials ensures the regular supply of raw materials
from suppliers. Suppliers are satisfied by the payment on time. It ensures
regular supply of raw materials and continuous production. A firm having
adequate working capital, high solvency and good credit rating can arrange
loans from banks and financial institutions in easy and favorable terms.

16
 WORKING CAPITAL ANALYSIS

CURRENT ASSETS:
Current assets are those which can be converted into cash as and
when needed, i.e., those assets which can turn to cash as per the
requirement of the business within the accounting period.

SUNDRY DEBTORS
Debtors are those to who products are supplied on credit basis. These
amounts are collected within the accounting period. Therefore, they are
converted into cash as per requirement, hence they are considered under
current assets.

INVENTORIES
Closing stocks or inventory includes raw materials, work in progress
and finished goods, which are needed for the smooth running of the
organization. Generally inventory is maintained by every organization, which
is bound to meet its demand in the market. The amount of inventory
maintained by the firm represents its profitability position. The quality must
not be in excess or inadequate, it must be according to the requirement. The
quality stores must be able to meet the market demand.

CASH AND BANK

Every organization or firm maintains cash reserves in their accounts.
This is the major key on which working of the entire organization is dependent
upon. This is required in every aspect of production, marketing, financing etc.
In other words, it can be said that it plays a vital role in the functioning of any
organization.

LOANS AND ADVANCES

Advances to staff are those advances, which are given to the
employees as festival advances. These advances are treated as current
assets as they are given advance to the employees and are collected within
the accounting year. It doesn’t result in any default payment as the amount is
deducted from their salaries directly during their payment. Their advances
are prepared and are collected in the accounting year. These are the loans
and advances amount that are given by the organization in procuring of raw
materials. Amount is given in advance to its supplier in supplying the raw
17
 materials required and this is adjusted after receiving the raw material. The
final settlements take place only after deducting the advances amount from
total amount.

CURRENT LIABILITIES:
Current liabilities are those which are payable during an accounting
year. These are paid out of current assets like cash. When current assets
availability is present there exist the current liabilities but current assets must
always be in excess to current liabilities. This provides the organization to be
in a good position.

SUNDRY CREDITORS
Creditors are those from whom products are purchased on credit
basis. These amounts are paid within the accounting period. If the creditors
number increase the amount payable also increases which further increases
the liquidity.

LINE OF CREDIT:
Banks to new business do not often give lines of credit. However, if
your new business is well capitalized by equity and you have good collateral,
your business might qualify for one. A line of credit allows you to borrow funds
for short terms needs when they arise. The funds are repaid once you collect
the accounts receivables that resulted from the short-term sales peak. Lines
of credit typically are made for one year at a time and are expected to be paid
off for 30 to 60 consecutive days sometime during the year to ensure that the
funds are used for short-term needs only.

SHORT TERM LOAN:

While your new business may not qualify for a line of credit from a bank, you might havesuccess
in obtaining a one-time short-term loan (less than a year) to finance your temporary working
capital needs. If you have established a good banking relationship with a banker, he or she
might be willing to provide a short-terms note for one order or for a seasonal inventory and/or
accounts receivable buildup. In addition to analyzing the average number of days it takes to
make a product (inventory days) and collect on an account (account receivable days) Vs. the
number of days financed by accounts payable, the operating cycle analysis provides one other
important analysis. From the operating cycle, a computation can be made of the dollars
required to support one day of accounts receivables and inventory and the dollars provided by
a day of accounts payable. Working capital has a different impact on cash flow in a business.

18
 CHAPTER 2

RESEARCH METHODOLOGY

What is Research…?

Research means search for facts in order to find answers to certain

questions or to find solutions to certain problems. It is often referred to as
‘scientific inquiry’ or ‘scientific investigation’ into a specific problem or
situation. This is because; the search for facts should be made by scientific
method rather than by arbitrary method. The scientific method uses
systematic rational approach to search for facts, whereas, the arbitrary
method attempts to find answers to questions on the basis of imagination and
one’s own beliefs and judgment.

In simple words Research is the systematic process of finding out

problems between variables by investigating inside or outside of the company
and giving better solutions to it.

19
 TYPES OF RESEARCH

Types of research are very important to research something in the

company or somewhere else. There are many researches which suits for
different areas to find out the problems in an organization, for e.g. quantitative
research at numerical area. I have been used three types of researches for
my project work that is Descriptive Research, Historical Research and
Quantitative Research.

Descriptive Research:

Descriptive research helped me to find out facts and details of the SJ

Engineering I have been enquired directly to senior executives and senior
employees about what has happened and what is happening in the company.

Historical Research:

S.J ENGINEERING COMPANY was established in 1994 and is

currently made up of a team of experienced technicians. We are one of the
leading companies for Plumbing and Sanitary installation. We uphold the
principles of loyalty, trustworthiness and integrity.

Quantitative Research:

This research has undertaken to measure the quantity or amount of

the company. I glanced at company’s balance sheet then I came to know
since 3- 4 years they are in loss. Company’s expenses and current liabilities
are more than profit and current assets respectively.

20
 OBJECTIVES OF THE STUDY

 To study the various components of working capital.

 To analyze the liquidity trend of S.J Engineering.

 To appraise the utilization of current asset and current liabilities

and find out short- comings if any.

 To suggest measure for effective management of working capital.

 To measure and evaluate the liquidity and profitability position of S.J

Engineering.

21
 LIMITATIONS OF THE STUDY

 Time factor is the most crucial one. The study was conducted within
a short period of two months.

 S.J Engineering executives were hesitating to provide information.

 I had to wait for a long time to make contact with the executives,
because they were busy with their work.

 Due to busy work schedule, detailed discussions were not possible

 It is also found that some of the executives lack interest,

enthusiasm, initiative and involvement, which was de-motivated me.

 Competitors of S.J Engineering have given less information and data.

 Lot of time consumed during survey.

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22
 STATEMENT OF PROBLEM

At early stage S.J Engineering company facing many problems from

suppliers because of low capital they are unable to make payment on time so
more than 50% of suppliers are not supplying on credit basis. So that
company has to make payment in advance and on delivery.

Customers delaying invoice payment was deemed by survey

respondents to have had a high or very high impact on working capital over
the past 12 months. Similarly, customers exerting pressure on businesses to
extend their credit and payment terms were also placing high or very high
pressure on working capital.

The main problem from suppliers i.e. 80% suppliers are from India
from that 70% suppliers allowing 30 - 45 days credit and for rest of them
company has to make payment in advance. 20% suppliers from rest of the
country from that 40% of suppliers allowing 60 - 90 days credit and for rest
of them company has to make payment in advance.

Stretching credit period of suppliers is the main source to improve

working capital but here it is not there. So this is one of the cause for working
capital. Company spending a lot for unnecessary things therefore Company’s
expenditure is also more than income since 3 years.

23
 REVIEW OF LITERATURE

Working capital is very important for every company to meet day to

day operation expenses and urgent payments. Effective working capital
increase the company profit and vice versa. For effective working capital,
collection days should be less and payment days should be more overall cash
conversion cycle days should very low or in negative.

Many researchers have studied working capital from different views

and in different environments. The following ones were very interesting and
useful for our research:

Eljelly (2004) Identified the relation between profitability and liquidity who
was examined, as measured by current ratio and cash gap (cash conversion
cycle) on a sample of joint stock firms in Saudi Arabia. The study found that
the cash conversion cycle was of more importance as a measure of
liquidity than the current ratio that affects profitability. The size variable was
found to have significant effect on profitability at the industry level. The results
were stable and had important implications for liquidity management in
various Saudi firms. First, it was clear that there was negative relationship
between profitability and liquidity indicators such as current ratio and cash
gap in the Saudi sample examined. Second, the study also revealed that
there was great variation among industries with respect to the significant
measure of liquidity.

Lazaridis and Tryfonidis (2006) have explored the relationship between

corporate profitability and WCM in the Athens Stock Exchange. The finding
of results shows a negative relationship between profitability and working
capital indicators like days of accounts receivable, account payable and cash
conversion cycle. They concluded that firms can create profits by effectively
handling each component of the cash conversion cycle.

Saswata Chatterjee (2010) Focused on the importance of the fixed and

current assets in the successful running of any organization. It poses direct
impacts on the profitability liquidity. There have been a phenomenon
observed in the business that most of the companies increase the margin for
the profits and losses because this act shrinks the size of working capital
relative to sales. But if the companies want to increase or improve its liquidity,
then it has to increase its working capital. In the response of this policy the
24
organization has to lower down its sales and hence the profitability will be
affected due to this action. For this purpose 30 United Kingdom based
companies were selected which were listed in the London Stock exchange.
The data were taken of three years 2006-2008. It analyzed the impact of the
working capital on the profitability. The dimensions of working capital
management included in this research which is quick ratios, current ratios
C.C.C, average days of payment, Inventory turnover, and A.C.P (average
collection period. on the net operating profitability of the UK companies.

Mohamad and Saad (2010) Used Bloomberg's database of 172 listed

companies randomly selected from Bursa Malaysia main board for five year
period from 2003 to 2007. Applying correlations and multiple regression
analysis, they found that current assets to total asset ratio shows positive
significant relationship with Tobin Q, ROA and ROI. Cash conversion cycle,
current asset to current liabilities ratio and current liabilities to total assets
ratio illustrate negative significant relations with Tobin Q, ROA and ROIC.

All the above studies provide us a solid base and give us idea
regarding working capital management and its components. They also give
us the results and conclusions of those researches already conducted on the
same area for different countries and environment from different aspects. On
basis of these researches done in different countries, we have developed our
own methodology for research.

25
 RESEARCH DESIGN

Problem: In S.J. engineering, since 3 years there is negative and equal

relationship between current assets and current liabilities. Collection period
is more than payment period so cash conversion cycle is more which should
be less or negative. This is main pressure on working capital.

Objective: The main objective of research is to appraise the utilization of

current asset and current liabilities and find out short-comings if any and to
suggest measure for effective management of working capital.

Sampling Design: I have been used judgement method in non-random

sampling. Because all will not be good respondents to answer my questions.
I have selected those who know about working capital, debtors, creditors,
stock etc.

Data Collection: I have been collected data through both primary and
secondary. Primary data from Questionnaire, Observation and Personal
interview with CFO, executives and senior employees. Secondary data from
annual reports and company websites.

Areas of Data Collection: I was visiting different company to collect data. I

have done survey other than S.J. engineering

Time Frame: I have done this research activity in two months.

26
 SAMPLING DESIGN

Sampling Method:

I have been used appropriate sample to collect right data from

respondents. For research in finance we cannot ask information to everyone
regarding finance. We should concern the person who is aware about the
company finance. So that I have used non random sampling under this I have
used judgement method to collect data. I have gathered data by judgement.
I have concerned the one those who aware about company’s working capital
i.e. debtors, creditors, receivables, payables, stock cycle etc.

Sample Size:

The study encompassed a representation of a sample of 30

respondents from S.J. engineering.

TABLE 1: Sample Size Distribution

Department No of
Respondents
Production 5
Marketing and Distribution 15
Finance 20
Total 30
Source: Primary Data

Table 2.1: Sample Size Distribution

27
 DATA COLLECTION

Sources of Data:

There were mainly two major sources of data namely;

Primary Data:

Primary data has been obtained through personal discussions with

managers and senior officials of the organization, observations and
questionnaire both open ended and closed ended.

Secondary Data:

Secondary data has been obtained from published reports like the annual
reports of the company, balance sheets, and profit and loss account,
websites, records such as files, reports maintained by the company.

28
 CHAPTER 3

INTRODUCTION

S.J Engineering Company was established in 1994 by a team of highly

qualified and experienced professionals to employ the best engineering practices
in the field of plumbing and sanitary installations. Under the careful supervision of
seasoned professionals and a dedicated team of workers, technicians and site
engineers, we are equipped to take up projects right from the pre-planning phase
and see them through to completion. With a workforce of 25 staff and over 40
trained technicians and workers, we treat every project with the finest of attention
to detail it requires.

There are new techniques, materials and innovations advancing the art of
plumbing in several parts of the world, benefitting millions of end users. Little of
that knowledge, expertise and benefits are reaching our part of the world. The
reason is that this sector is highly fragmented and unorganized. We have two area
site offices located at Ernakulum and Trivandrum to ensure a smooth and speedy
execution. Over the 24 years of operations, we have completed over 85 plumbing
and sanitary installation projects for apartments, hotels, hospitals, educational
institutions and commercial complexes.

ENGINEERING WORKS

Engineering is the application of scientific, economic, social, and practical knowledge

in order to design, build, and maintain structures, machines, devices, systems,
materials and processes. It may encompass using insights to conceive, model and
scale an appropriate solution to a problem or objective. The discipline of engineering
is extremely broad, and encompasses a range of more specialized fields of
engineering, each with a more specific emphasis on particular areas of technology
and types
29
CONSTRUCTION WORKS

In the fields of architecture and civil engineering, construction is a process that

consists of the building or assembling of infrastructure. Far from being a single
activity, large scale construction is a feat of human multitasking. Normally, the job is
managed by a project manager, and supervised by a construction manager, design
engineer, construction engineer or project architect.

PLUMBING WORKS

Plumbing is the system of pipes, drains fittings, valves, valve assemblies, and
devices installed in a building for the distribution of water for drinking, heating and
washing, and the removal of waterborne wastes, and the skilled trade of working with
pipes, tubing and plumbing fixtures in such systems. A plumber is someone who
installs or repairs piping systems, plumbing fixtures and equipment such as water
heaters and backflow preventers.

CONSULTING SERVICES

We can provide a qualified, tested and successful consulting solution to

businesses new to the region, or those already established who are looking to boost
growth and profitability. Every consulting solution is bespoke according to each
client's specifics needs, time frame and budget. While our primary goal here is to help
clients in solving complex business problems; we plan and implement strategies that
are data backed and proven to effectively aid better decision-making. We help
organizations engage people and uncover insight from data to shape the products,
services and experiences they offer.

30
 CLIENTS OF S.J. ENGINEERING

TABLE 2:

RESIDENTIAL COMMERCIAL HOTELS HOSPITALS EDUCATIONAL

INSTITUTIONS

Kalyan National Paint Hotel Cosmopolitan The Choice

Jewellers Factories Avenue Hospital School
Centre
Kalyan CRD Head Hotel Sangetham Pushpagiri
Saphire Quarters Gopika Hospital Medical
Residency College

SFS Ernakulam Hotel Pushpagiri Fluid Control

Casaflora District Laya Medical Research
Collectrate Society Institute

Amala Muthoot Hotel Sivapriya Jawaharlal

Heights Commercial Nayana hospital Nehru College
Complex of Engineering
And
Technology

Confident Sion Green Athani

Orion Commercial Oasis Hospital
Complex

Table 3.1: Clients of S.J. Engineering

31
FIGURE 1:

CLIENTS OF S.J. ENGINEERING

hotels Architects Builders Corporates

Figure 3.1: Clients of S.J. Engineering

32
 VISION & MISSION

Vision:

 SJ Engineering Company came into existence with a vision to achieve the

highest standards of excellence in the plumbing sector in Kerala.

 They thought that a good, problem-free plumbing installation is fundamental to

a comfortable life.

Mission:

 Focus and maintain business in its most profitable segments while expanding
into new business segments.

 Deliver exceptional client service with an unrelenting focus on value creation

 To set standards in service to customers.



 Pursue operational excellence with a strong focus on quality and margins

33
 SWOT ANALYSIS

Strengths Weakness

Opportunities Threats

Strengths:

 Qualified and expert team of professional and management

 World-class technology and equipment
 Continuous innovation and quality control
 Strong branding
.

Weakness:

 No established reputation.
 Competition from established players with global backing

34
Opportunities:

 Strong entry barrier due to the capital-intensive nature of the industry

Threats:

 Competition in processing from established international players



35
 DRIVERS OF S.J. ENGINEERING FUTURE GROWTH

At S.J. Engineering, we feel the following factors will ensure our growth in the
coming years:

MEN:
We believe every single resource involved in a project – be it a
manager, an engineer or a technician – plays a vital role in its successful
completion. That is why we inculcate the culture of good decision making,
right from managerial positions to the lower levels, and encourage our
employees to take full ownership of their work.
To help our people keep up with the trends and technological advancements
in the industry, employees at all levels are given training periodically to arm
them with the latest of knowledge and skills. Today our biggest asset is our
team of highly qualified and dedicated people who deliver every task,
however small, with the highest degree of perfection.

METHOD:

During the year, we focused on controlling costs and improving

quality. We initiated steps to control inventory, reduce process costs and
machine downtimes and ensuring efficient utilization of energy during the
year. In doing this, our ERP system played a vital role in identifying
addressable segments within the processes.

MATERIAL:

We use superior quality of materials for all our projects which

increased our customer statisfication, which resulted in more numbers of
projects to work on. Due to fine quality of materials we use the final output
too came in a very fine quality.

36
 CHAPTER 4

DATA ANALYSIS AND INTERPRETATIONS

Profession wise classification:

12, 12%

Experienced
Freshers
36, 36% 36, 36%
Mid Level
52, 52%

Fig. 4.1: Profession of Respondents

TYPE NO. OF RESPONDERS PERCENTAGE

Experienced 120 52%

Mid-Level 86 36%

Fresher 71 18%

Table 4.1: Profession of Respondents

37
Gender wise classification:

48 Female

52 Male

Fig. 4.2: Gender of Respondents

GENDER NO. OF RESPONDENTS PERCENTAGE

Male 107 48%

Female 156 52%

Total 263 100%

Table 4.2: Gender of Respondents

Inference:

From the above table, 263 respondents accounting to 48% are male and 156
respondents accounting to 52% are female.

38
Education wise classification:

4%
2%
21%

Bachelors
Masters
Diploma
Doctorate

73%

Fig. 4.3: Education of Respondents

EDUCATIONAL NO.OF PERCENTAGE

QUALIFICATION RESPONDENTS

Graduate 56 21%
Post-graduate 126 73%
Undergraduate 17 2%

Table 4.3: Education of Respondents

Inference:

From the above data, 21% of the respondents are graduates, 73% of the
respondents post-graduate, 2% of the respondents are undergraduate.

39
 Experience wise classification:

26 27

>3 years
3-5 years
<5 years

47

Fig. 4.4: Experience of Respondents

DIMENSIONS NO.OF. RESPONDENTS PERCENTAGE

>3 years 87 27%

3-5 years 52 47%

<5 years 34 26%

Table 4.4: Experience of Respondents

Inference:

From the above table, Maximum respondents accounting to 47% have 3 to 5

year experience. 26% of the respondents have <5 years of experience, 27% of
the respondents have >3 Years of experience.

40
Graphical Representation Of Level Of Importance Of Working Capital
Management In The Organization:

3
Series 1
Series 2
Series 3

0
High Average Low Not at all
Series 1 4.3 2.5 3.5 4.5
Series 2 2.4 4.4 1.8 2.8
Series 3 2 2 3 5

Fig. 4.5: Graphical Representation Of Level Of Importance Of Working Capital Management In

The Organization

41
Credits wise classification:

0
10%

0-30 days
30-60 days
30%
60-90 days
Above 90 days
60%

Fig. 4.6: Credits of Respondents

DIMENSION NO. OF. RESPONDENTS PERCENTAGE

0-30 days 135 60%

30-60 days 66 30%

60-90 days 26 10%

Above 90 days 10 0%

Table 4.6: Credits of Respondents

Inference:

From the above table, Maximum respondents accounting to 60% have 0-30
days credits. 30% of the respondents gave 30-60 days of credits, 10% of the
respondents have 60-90 days of credits.

42
Interest Wise Classification:

10%

Yes
No

90%

Fig. 4.7: Credits of Respondents

CHARGING INTEREST NO.OF.RESPONDENTS PERCENTAGE

Yes 156 90%

No 26 10%

Table 4.7: Credits of Respondents

Inference:

From the above table out of 156 respondents 90% gave yes for charging
interest after due date, and out of 26 respondents 10 % gave No for charging interest.

43
Company Reminding Customers To Pay The Balance Amount Wise
Classification:

30%

Weekly
Monthly
Quarterly
1.2 60%
Annually

7%

Fig. 4.8: Company Reminding Customers To Pay The Balance Amount of Respondents

DIMENSION NO. OF. RESPONDENTS PERCENTAGE

Weekly 67 30%

Monthly 88 60%

Quarterly 20 7%

Annually 17 3%

Table 4.8: Company Reminding Customers To Pay The Balance Amount of Respondents

Inference:

From the above table 60% of the respondents reminded weekly to pay the
balance 30 % are weekly 7% are quarterly 3%are annually.

44
 CHAPTER 5

FINDINGS AND SUGGESTIONS

FINDINGS:

 At the early stage, company facing many problems from suppliers

because of low capital they are unable to make payment on time so
more than 50% of suppliers are not supplying on credit basis. So that
company has to make payment in advance and on delivery.

 Customers delaying invoice payment was deemed by survey

respondents to have had a high or very high impact on working capital
over the past 12 months. Similarly, customers exerting pressure on
businesses to extend their credit and payment terms were also placing
high or very high pressure on working capital.

 The main problem from suppliers i.e. 80% suppliers are from India
from that 70% suppliers allowing 30 - 45 days credit and for rest of
them company has to make payment in advance. 20% suppliers from
rest of the country from that 40% of suppliers allowing 60 - 90 days
credit and for rest of them company has to make payment in advance.

 Stretching credit period of suppliers is the main source to improve

working capital but here it is not there. So this is one of the cause for
working capital. Company spending a lot for unnecessary things
therefore Company’s expenditure is also more than income since 3
years.

 Since three years Receivables is more than Payables and borrowings

is also more than advances & loans.

45
SUGGESTIONS:

Debtors & Receivables:

 Company should keep reminding customers about outstanding

amount on a weekly basis.
 Company should call and inform customers about cash discount
offered for early payment.
 Company should try to convince customer for acceptance of bill
so you can release cash from bank with discount.
 Company should count back debtor days as far as possible.

Creditors & Payables:

 Because of long outstanding amount suppliers are not ready to

supply on credit so company should try to clear outstanding amount
of suppliers so that they can ask more credit days as far as
possible.
 Company should maintain good relationship with suppliers, for that
they have to make payment on due date.
 Company should make payment on due date so they can escape from
interest.

Inventory:

 Company should try to reduce inventory cycle.

 Company should ensure that on time delivery.

Liquidity:

 Company should maintain liquidity in bank so they can meet urgent

needs.

Cash Conversion Cycle:

 Since 3 years inventory days and receivables days are more than
payables days which should be less. So they should work on it.

46
 CHAPTER 6

CONCLUSION

Liquidity is an attribute that signifies the capacity to meet financial

obligations of the company when required. The importance of liquidity to meet
the day to day operations and urgent payment to suppliers. A firm should
maintain adequate level of working capital to meet the day to day operations
and maintain business operations. The effective management of working
capital requires both medium-term planning and immediate reactions to the
fast changes taking in the present business environment. The effectiveness
of working capital depends on all current assets and current liabilities.

S.J. Engineering should count back credit days of customers and they
should keep reminding them about outstanding amount and they should give
discount offers for early payment. Company should settle outstanding amount
of suppliers and maintain good relationship then they should pull suppliers
credit days as far as possible.

Raw materials used to be in factory for high period to convert into

finished goods. Receivables days also more so more days tied up with
inventory and receivables. Therefore S.J. Engineering should be taken care
of operating cycle and cash conversion cycle.

47
 BIBLIOGRAPHY

Books:
 Research Methodology- R.C. Kothari.
 Research Methods In Business- Dhruv Shah, Rupal Jain.
 Research Methodology- Michal Vaz, Madhu Nair.
 Financial Management – Prasanna Chandra.

Journals:
 CAMS Journal of Business Studies and Research ISSN : 0975-7953
July-September
 Asian Journal of Management Research Volume 4 Issue 2, 2014
 International Journal of Economics and Financial Issues, Vol. 2, No. 4,
2012, pp.488-495
 Proceedings of the 3rd International Conference on Management
and Economics (ICME 2014)

Websites:
 www.google.com
 www.wikipedia.com
 www.fm-magazine.com
 www.accountingtools.com

48
 ANNEXURE

Questionnaire

(Tick as Appropriate)

Section-A: Personal Data

1. Your Age
1) Bellow 25 yrs 2)25-29 yrs 3) 30-34 yrs 4) 35 yrs & Above

2. Gender
1) Male 2) Female

3. What is Your Qualification?

1) Undergraduate 2) Graduate 3) Post-Graduate

4. How long have you been working

in this company?
1) Less than 3 yrs 2)3-5 yrs 3) Above 5
yrs

Section-B: Working Capital

5. How would you rate the level of importance by which working capital
is placed in the organization?
1) High 2) Average 3) Low 4) Not at all

6. How many days credit do you give to Customers/ Debtors?

1) 0-30 days 2) 30-60 days 3)60-90 days 4) Above 90 days

7. Is there Bill of Exchange facility in your company? If yes, why don’t

you release cash from bank against bill.

49
8. Do you charge interest if customers/ debtors will pay you after due date?
1) Yes 2) No
(If no why?)

9. How many days credit do you take from Suppliers/ Creditors?

1) 0-30 days 2) 30-60 days 3)60-90 days 4) Above 90 days

10. How often does your company remind customers to pay the balance
amount?
1) Weekly 2) Monthly 3) Quarterly 4) Annually

11. Do you give discount offer to customers/ Debtors for early payment?
1) Yes 2) No
If No why?

12. What is stock cycle in your company?

1) Less than 30 days 2) 31 days – 60 days 3) more than 60 days

13. Rate the percentage of credit risk in your company

1) Less than 5% 2) 5-10% 3) Over 10%

14. What is the bad debt level in your accounts receivable?

1) Less than 1% 2) 1% - 5% 3) 6% - 10% 4) Over 10%

15. How many days do you take to convert into finished goods from the
date of purchase of raw materials?
1) Less than 10 days 2) 10 days - 20 days 3) more than 20 days

16. Do you use banking source to finance your working capital?

1) Yes 2) No
If No why?

17. How often does your company review its working capital policy?

1) Weekly 2) Monthly 3) Quarterly 4) Whenever necessary

50
51