SUMMER INTERNSHIP PROJECT

REPORT
ON

WORKING CAPITAL
MANAGEMENT
IN

MARATHON ELECTRIC INDIA PVT.

LTD.

SUBMITTED IN PARTIAL FULFILLMENT

TOWARDS THE AWARD OF
MASTER OF BUSINESS ADMINISTRATION
(2013 15)

SUBMITTED BY:
SUNIL KUMAR
University Roll No. : 138410183
MBA II YEAR (IV TRIMESTER)

1
 INSTITUTE OF BUSINESS MANAGEMENT

DECLARATION

I SUNIL KUMAR, student of MBA session 2013-2015, hereby declare that my

work entitled Analysis ofworking capital management at Marathon Electric India
Pvt. Ltd. is the outcome of genuine efforts done by me under an able
guidance of MR. MAHESH NAGPAL (Finance Controller) and been
submitted to the GLA University, (Mathura) as a dissertation in partial
fulfillment for the award of the degree of Master of Business Administration
(MBA) comprises only my original work and due toan acknowledgement
has been made in the text to all other material used.

Date:
(SUNIL KUMAR)

2
3
ACKNOWLEDGEMENT
4
Application of theoretical knowledge to a practical situation is the bonanzas of this
survey. Without a proper combination of inspections and perspirations, its not
easy to achieve anything. There is always a sense of gratitude, which we express
to others for help and the needy service they render during the different
phases of our lives. We would do it as we really wish to express my
gratitude toward all those who have been helpful to us directly or
indirectly during the development of this training report.

We would like to thank my supervisor Mr. MAHESH NAGPAL (Finance

Controller) who was always there to help and guide us when we
needed help. His perceptive criticism kept us working to make this report
more full proof. We are thankful to him for encouraging and valuable
support. Working under his was an extremely knowledgeable and enriching
experience for me. We are very thankful to him for all the value
additions and enhancement done to me. I also thanks to our Assist. Professor
(Mr.Ankit Saxena) of GLA University.

No words can adequately express our overriding debt of gratitude to my

parents, whose support helps me in all the way. Above all we shall thank our
colleagues who constantly encouraged and blessed me so as to enable us
to do this work successfully.

EXECUTIVE SUMMERY
5
The report basically related to the how to manage working capital in the
company. Cash is the lifeblood of the company without this company
cannot run successfully. In this we find out the shortfalls of working capital
management and to find out the company liquidity, profitability we use
some tools to analyze the financial data of the company for some future
plan. For this study, we collect both types of data primary data, as well as
secondary data also. We use the descriptive method of the research methodology. To
complete this summer training report in a short time my supervisor and my
colleagues also help to me.

INDEX
6
SR PARTICULARS PAGE
NO. NO.
I Front Page i

II Declaration ii

III Company certificate Iii

IV Acknowledgement iv

V Executive Summery v

VI Index vi

1 Chapter 1 1 10
About the Company Profile
2 Chapter 2 11 19
Introduction to the topic
3 Chapter 3 20 25
Objective and Methodology
4 Chapter 4 26 47
Data analysis and interpretation
6 Chapter 5 48 50
Finding & Conclusions
7 Limitation for further study 51

8 Appendices vii xi

7
 CHAPTER 1
INTRODUCTION
&
ABOUT
THE COMPANY PROFILE

COMPANY PROFILE
8
Marathon Electric India Pvt. Ltd. Was established in 1913. Since 1913, Marathon
Electric has been dedicated to providing customers with quality products for targeted
applications.

Headquartered: Wausau, Wisconsin, USA

Regd. Office & Works: Faridabad (Haryana)

Product: Motors

Nature of business: Manufacturing & Assembling

Website: www.marathonelectric.in

INTRODUCTION

9
In India, Marathon Electric delivers efficient mechanical power solutions using AC
electric motors up to 4.5MW. Marathon Electric India has manufacturing facilities,
Marathon Electric India Pvt. Ltd. At Faridabad & Marathon Electric Motors (India)
Ltd in Kolkata. Together, Marathon Electric in India is the Largest
Manufacturer & Exporter of Electric Motors. MEIPL strategic product lines
include Motors and Fans. Our range of Fractional Horsepower motors serves
applications such as Heating, Ventilating, Air-conditioning & Commercial
Refrigeration (HVAC), General Purpose Applications, Evaporative Coolers & Cooler
Kits, and Washing Machines & Wet Rice Grinders. MEIPL Integral Horsepower
motors range up to 11KV serving a wide range of applications such as pumps,
compressors, fans, crushers, conveyors, kilns etc. We also manufacture Propeller,
Axial Flow and Centrifugal Flow type of industrial fans used for various purposes.

Marathon Electric is part of Regal Beloit

Corporation. The Regal Beloit Corporation is a
leading manufacturer of electrical and mechanical
motion control and power generation products
serving markets throughout the world. Regal
Beloit is headquartered in Beloit, Wisconsin, and
has manufacturing, sales, and service facilities
throughout North America and in Mexico,
Europe, and Asia.

Global Technology Center - India (GTCI)

10
The Global Technology Center (Marathon) - India, also known as GTCI is
located at the ve y heart of the city of Hyderabad, the city of pearls. The
technology center is the global hub for Engineering and Information Technology.
GTCI has world class facilities with Engineering and IT teams working
collaboratively with Regal Beloit locations globally. This center started its
operations in August 2005. Since then the technological improvements and
world class delivery has made GTCI a truly competitive advantage for Regal
Beloit Corporation.

Our Brands

Marathon in India is also well known for its brands Genteq, AUE & Cool Home.

11
 Our Products

AC motors, single / Three phase

Cooler motors and Fans

Air Circulator

Wet Rice Grinder

Cage Induction Motors

Roller Table Motors

ECM Motors

Fitness Equipment Motors

Marathon Electric Business units

India Headquarter/ MEIPL Faridabad, Haryana
Manufacturing Unit of Fractional Horsepower Motors

12
 MEMIL Kolkata, West Bengal
Manufacturing unit of Integral Horsepower HVAC Motors

Global Technology Center (Marathon) India Hyderabad

The technology center is the global hub of Engineering and information
Technology.

Our Vision
We will clearly differentiate our products and services as the best value to our
customers, as measured by our customers. We will maintain a sustainable, competitive
advantage through the excellence of our people and our processes creating value for
all our stakeholders.

Our Mission
We will live our values, demonstrating integrity in all our actions. We will function
with a high level of personal energy, energizing those around us. We will have the
courage to make difficult decisions and execute to accomplish our vision.

Award and recognitions

13
Safety Award, 2007

Haryana State Safety and Welfare Awards 2007

2008 Annual S.A.F.E. Award

Safety Awareness for Employees Award

Award for Export Excellence

14
ISO 9001:2000

ISO 9001:2008 Certificate from NSF

Award for Excellence in Cost Management

Objectives
To deliver world class performance to customers through innovation, quality,
delivery, responsiveness and cost.

Develop, attract,& retain the best people by providing and engaging work
environment while helping them achieves their career goals.

15
 Stand top quartile performance in the diversified industrial sector with respect
to revenue growth, profitability, and cash flow.

Factors of Success

Wide range of motors.

Well advanced manufacturing plant and localization.

Brand value and excellent service after sales.

A developer in FHP motors and hasa major export marketof India.

80 percent market of market share in India for FHP motors.

20 percent market share in IHP motors.

SWOT Analysis

Strength Weakness

Innovative products Lack of HRD measure to

Largest manufacturing unit in
retain skilled professional
India Complex organization
Best technology
structure
Customized product Pricing of products
Indigenous technology
Opportunities Threats

Power sector growth in India Flood of imports from china

Global opportunities New competitors
SME built duplicate products
16
17
 CHAPTER 2
INTRODUCTION,
OBJECTIVE AND SCOPE OF STUDY

INTRODUCTION
Meaning of Capital
In the ordinary sense of the word capital means an initial investment invested by a
businessman or owner at the time of commencing the business.

Introduction of Working Capital

It describes about how the company manages its working capital and the various steps
that are required in the management of working capital.

18
Cash is the lifeline of a company. If this lifeline deteriorates, so does the companys
ability to fund operations, reinvest, and meet capital requirements and payments.
Understanding a companys cash flow prospects is to look at its Working Capital
Management.

Thus, in very simple words, working capital may be defined as capital invested in
current assets. Here current assets are those assets, which can be converted into cash
within a short period of time and the cash received is again invested in these assets.
Thus, it is constantly receiving or circulating. Hence, working capital is also known as
circulating capital or floating capital.

Meaning of working capital

Working capital means the funds (i.e., capital) available and used for day to day
operation (i.e.; working) of a company. In Accounting

Working Capital = Current Assets Current Liabilities

Definition of working capital

According to Weston & Brigham

Working capital refers to a firms investment in short term assets - cash, short
term securities, account receivable, and inventories.

According to Mead Mallett& Field

Working capital means current assets

The project describes how the management of working capital takes place at
Marathon Electric India Pvt. Ltd.

Classification of working capital

Working capital can be classified are as follows-

On the basis of concept

On the basis of time

Kinds of Working Capital

19
 On the basis of On the basis of time
concept

Gross Net working Permanent/ Temporary

working capital /Variable
capital Fixed working working capital
capital

Regular Reserve Seasonal Special

working working working working
capital capital capital capital

According to concepts, there are two types of working capital these are-

Gross working capital

Net working capital

1. Gross working capital

Gross working capitalrefers to investment in all current assets -raw materials, work-
in-progress, finished goods, book debts, bank balance and cash balance. The gross
concept of working capital is significant in the context of measuring working capital
needed, measuring the size of the business, continued and smooth flow of operations
of the business and the like.

2. Net working capital

Net working capitalrefers to the excess of current assets over current liabilities. That
is, the value of current assets minus the value of current liabilities (currentliabilities
includetrade creditors, bills payable, outstanding expenses such as wages, salaries,
dividend payable and tax payable, bank overdraft, etc.) The net concept of working

20
capital is significant in the context of financing of working capital, the short term
liquidity aspects of the business, and the like.

Net working capital may be positive or negative. A positive net working capital arises
when current assets exceed current liabilities and a negative working capital occurs
when current liabilities are in excess of current assets. It shows bad liquidity position.
This is a qualitative concept which highlights the character of the sources from which
the funds have been procured to support that portion of the current assets which is in
excess of current liabilities.

According to time there are two kinds of working capital. These are-

Permanent working capital.

Temporary/varying working capital.

1. Permanent Working Capital

Permanent working capitalrefers to the minimum amount of all current assets

that is required at all times to ensure a minimum level of continuous business
operations. Some minimum level of raw materials, working process, bank
balance, finished goods, etc. a business has to carry all the time irrespective of
the level of manufacturing/marketing operations. This level of working capital
is referred to as core working capital or core current assets. Permanent
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 working capital is defined as the amount of current assets required to meet a
firms long-term minimum needs. You should note, that the level of core
current assets is not, however, a constant sum all the times. For a growing
business the permanent working capital will be rising, for a declining business
it will be decreasing and for a stable business it will be remaining more, or
lessstay-put. So permanent working capital perennially needs one though not
fixed in volume. This part of the working capital being a permanent
investment needs to be financed through long-term funds.Depending upon the
changes inthe production and sales, the need for working capital, over and
above the permanent working capital, will fluctuate.

Initial Working Capital:In the initial period of its operation, a firm must
need enough money to pay certain expenses before the business profits. In the
initial years the banks may not funding loans or overdrafts, sales may have to
be made on credit and it may be necessary to pay the creditors immediately.
Therefore the owners themselves have to provide the necessary funds in the
initial period, which may be known as initial working capital.

Regular Working Capital: The firm is always required to keep certain

funds with it to continue the regular business operations, which is called as
Regular Working Capital. It is required to maintain regular stock of raw
materials and work-in-progress and also of the finished goods, which must be
maintained permanently at a definite level. Regular working capital is the
excess of current assets over current liabilities. It ensures smooth operation of
business.

2. Temporary or Variable Working Capital

Temporary or variable working capitalvaries with the volume of operations. If

fluctuates with scale of operations. This is the additional working capital required
during up sessions over the above the fixed working capital. During seasons more
production/sales takeplace, resulting in larger working capital needs. The reverse
is true during off-seasons. As seasons alternate, temporary working capital moves

22
 up and down like tides. Temporary working capital is defined as the amount of
current assets that varies with seasonal requirements. Temporary working capital
can be financed through short term funds, i.e. current liabilities. When the level of
temporary working capital moved up, the business might use short-term funds and
when the level of temporary working capital recedes, the business might retire its
short term loans.

Seasonal Working Capital:Some business operations require additional

working capital during a particular season. For example, the groundnut oil
producers may have to purchase groundnut in a particular season and have to
employ additional labor for that purpose. These may require additional funds
for a temporary period, which may be called as seasonal working capital.

Special Working Capital: In all enterprises, some unforeseen events do

occur like a sudden increase in demand, downward movement of prices of raw
materials, strike, or natural calamities, when extra funds are needed to tide
over such situation. Such type of extra funds is called as Special working
capital.

Importance of working capital

Working capital is one of the important measurements of the financial position. The
words of H. G. Guthmann clearly explain the importance of working capital.
Working Capital is the lifeblood and the nerve center of the business. The object of
working capital management is to manage firms current assets and liabilities in such
a way that a satisfactory level of working capital is maintained. If the firm cannot
maintain a satisfactory level of working capital, it is likely to become insolvent
andmay even be forced into insolvency. Thus, the need for working capital to run day-
to-day business activities smoothly cant be overstated.

Requirements of working capital

There are no set rules or formula to determine the working capital requirements of the
firms. A large number of factors influence the working capital need of the firms. All

23
factors are of different importance and also an important change for the firm over
time. Therefore, an analysis of the relevant factors should be made in order to
determine the total investment in working capital. Generally the following factors
influence the working capital requirements of the firm:

Nature and size of the business

Seasonal fluctuations

Production policy

Taxation

Depreciation policy

Reserve policy

Dividend policy

Credit policy:

Growth and expansion

Price level changes

Operating efficiency

Sources of working capital

The financial manager is always interested in obtaining the working capital at the
right time at a reasonable cost and at the best possible favorable terms. A part of the
working capital investment is a permanent investment in fixed assets. These following
are the various sources of working capital:-Source of working capital divided into two
parts

Long - term
Short - term

Sources of long term working capital

Issues of share
24
 Floating of debenture
Public deposit
Loans

Sources of short term working capital

Internal source
Depreciation
Taxation
Accrued expense
Ploughing back of profit
External source
Bank credit
Trade credit
Government assistance
Loan from Director
Security of employee

Need of working capital

The need for working capital arises due to the time gap between production and
realization of cash from sales. Working capital is must for every business for
purchasing raw materials, semi-finished goods, stores & spares etc. and the following
purpose

To purchase raw material, spare parts and other components.

To meet overhead expenses.

To hold finished and spare parts etc.

To pay selling and distributing expenses.

To repair& maintenance both machinery as well as factory built.

To pay wages, salaries and other charges.

To helpful in maintaining uncertainties involved in business fields.

Working capital management

25
Working capital management means management or administrating of all aspects of
working capital: current assets and current liabilities.

In other word of Adam Smith; working capital management is concerned with the
problems that arise in attempting to manage the current assets, current liabilities and
the interrelationship that exist between them

Structure of Working Capital

The different elements or components of current assets and current liabilities
constitute the structure of working capital, which can be illustrated in the shape of a
chart as follows:-
Structure of Current Assets and Current Liabilities

Current Liabilities Current Assets

Bank Overdraft Cash and Bank Balance
Creditors Inventories: Raw-Materials
Work-in-progress
Finished Goods
Outstanding Expenses Spare Parts

Bills Payable Accounts Receivables

Short-term Loans Bills Receivables

Proposed Dividends Accrued Income

Provision for Taxation, etc. Prepaid Expenses

Short-term Investments

26
 CHAPTER 3
OBJECTIVE, SCOPE
AND
METHODOLOGY

Need of the Study

The need of the study is the important part of the project. My purpose of doing this
study is to find out the cause of shortage of working capital. Working capital is the
lifeblood and the nerve center of business. Working capital is very essential to
maintain the smooth running of a business. No business can run successfully without
an adequate amount of working capital. How the business retain their market share as

27
well as the goodwill of the company. So that company has to maintain its cash to run
the business and accomplishing their day to day expenses.

Objective of the study

To study the Working Capital position of Marathon Electric India Pvt. Ltd.

To study the movement of Working Capital components ( Inventory,

Creditor's, Debtors )

To evaluate the cash management performance in terms ( Size, Liquidity

control ) of Marathon Electric India Pvt. Ltd.

Scope of the study

The scope of study is identified after and during the study is conducted. The main
scope of the study was to put into practical and theoretical aspect of the study into real
life work experience. The study of working capital is based on tools like Ratio
Analysis, Statement of change in working capital. Further the study is based on the

28
last four years, i.e. 2009-2010 to 2012-2013 annual report of Marathon Electric India
Pvt. Ltd.

INTRODUCTON
The research methodology is a way to systematically solve the research problem. It
may be understood as a science of studying new research is done systematically. In
that various steps, those are generally adopted by a researcher in studying his problem
along with the logic behind them.

29
The procedure by which a researchergoes about their work of describing, explaining
predicting phenomenon is called methodology.

Research Design
A research design is an arrangement of condition for collection at analysis of data in a
manner that combines relevance to the research purpose with the economy in the
process.

Process of Research
Formulating the objective of the study(What the study is about and why it is
being made)

Designing the method of data collection (What technique of gathering data will
be adopted)

Selecting the sample (How much material will be needed)

Collecting the data (Where can be required data can be found and with what
time period should the data be related)

Processing and analysis the data

Reporting and finding

Sampling Design
A sample design is a definite plan for obtaining a sample from a given population. It
refers to the technique or the procedure adopted in selecting items for the sample. The
main constituents of the sampling design below-

Sampling unit

Sample size

30
Sampling unit
A sampling framework, i.e. developed roe the target population that will be sampled,
i.e. who is to be surveyed

Sample unit taken by me Financial statement of the company

Sample size
It is the substantial portions of the largest population that are sampled achieve reliable
results.

Sample size the last four years, i.e. 2009-2010 to 2012-2013 financial
statements of the company.

A tool used for calculation MS-Excel.

Data collection
The datahave been collected from two types-

Primary data

Secondary data

Primary data
Primary data are the data which is collected from first hand, for the first time which is
original in nature.

Secondary data
Secondary data are those data which have already collected and stored. Secondary
data easily get those secondary data from records annual reports of the company, etc.
It will save the time, money and to collect the data.

31
The major source of data of this project was collected through annual reports, profit
and loss account of the four year period of company, i.e. from 2009-2010 to 2012-
2013 and some more information collected from the internet and text source.

Tools used for Analysis of data

The data were analyzed using the following tools. They are-

Ratio Analysis.

Statement of changes in working capital.

32
 CHAPTER 4
DATA ANALYSIS
AND
INTERPRETATION

DATA ANALYIS AND INTERPRETATION

An analysis of working capital will be very helpful for knowing the operation
efficiency of the company. The following table provides data relating to the net
working capital of MIEPL.

(A) Net Working Capital = Current Assets Current Liabilities

Table showing Net Working Capital

33
 Year Current Assets Current Liabilities Net Working Capital

2009-2010 20,915.61 4,930.54 15,985.07

2010-2011 20,743.18 5,678.34 15,064.84

2011-2012 22,775.58 10,459.17 12,316.41

2012-2013 28,195.36 11,337.50 16,858.86

Source: financial statement (Amount in lakh)

Net Working Capital

18000

16000

14000

12000

10000 Net Working Capital

8000

6000

4000

2000

0
2009-2010 2010-2011 2011-2012 2012-2013

(Amount in lakh)

Interpretation
The above chart shows that during the financial year 2009-2010 the company had Net
Working Capital about Rs.15, 985.07 lakh. Duringthe next year, i.e.2010-2011 it
decreased by Rs.920.23lakh. It was Rs.15, 064.84lakh in the year 2010-11.And in the
year 2011-2012 it was Rs.12, 316.41lakh which again decreased by Rs.2, 748.43 lakh
as compared to last year, i.e. 2011-1012. The above chart interprets that the company
iscontinuingdecrease in the NWC till 2011-2012. But in the year 2012-2013it was

34
increased by Rs.4, 542.45 lakh. Duringthis year NWC was about Rs.16, 858.86 lakh.
This means that the company is in a positive position in the year 2012-2013 and it
hassufficient capital to pay off its current liabilities.

(B) Ratio Analysis

Introduction
Ratio analysis is a powerful tool financial analysis. Ratio analysis is a process of
comparison of one figure against another, which makes a ratio and the appraisal of the
ratios to make a proper analysis about the strengths and weakness of the firms
operations. The term ratio refers to the numerical or quantitative relationship between
two accounting figures. Ratio analysis of financial statement stands for the process of
determining and presenting the relationship of items and group of items in the
statements.

Types of Ratio Analysis

Liquidity Ratio

Turnover/Activity Ratio

1. Liquidity Ratios
Liquidity refers to the ability of a firm to meet its current obligations as and when
these become due. The short term obligations are met by realizing amounts of current,
floating, or circulating assets.

Following are the ratios which can help to assess the ability of a firm to meet its
current liabilities

35
 1. Current Ratio
2. Acid Test Ratio /Quick Ratio / Liquidity Ratio
3. Absolute Liquidity Ratio

2. Turnover / Activity Ratios

These are the ratios which indicate the speed with which assets are converted or
turned over into sales.

1. Inventory Turnover Ratio

2. Debtors/Account receivable Turnover Ratio

3. Creditors/Account payable Turnover Ratio

4. Working Capital Turnover Ratio

1.1Current Ratio
The Current ratio is a ratio, which express the relationship between the total current
assets and current liabilities. It measures the firms ability to meet its current
liabilities. It indicates the availability of current assets in rupees for every one rupee
of current liabilities. A ratio of greater than one means that the firms has more current
assets in the comparison of current liabilities. A standard ratio between them is 2: 1.

Current Ratio = Current Assets

Current Liabilities

Table showing the current ratio

Year Current Assets Current Liabilities Current Ratio

2009-2010 20,915.61 4,930.54 4.24

2010-2011 20,743.18 5,678.34 3.65
2011-2012 22,775.58 10,459.17 2.17
2012-2013 28,195.36 11,337.50 2.48
Source: financial statement (Amount in lakh)

36
 Current Ratio
4.5
4
3.5
3
2.5 Current Ratio
2
1.5
1
0.5
0
2009-2010 2010-2011 2011-2012 2012-2013

(Amount in lakh)

Interpretation
The above chart shows that during the financial year2009-2010 the company had a
current ratio of 4.24:1.During the nextyear, i.e.2010-2011 it decreased by 0.59. It was
about3.65:1 in the year 2010-2011. And in theyear 2011-2012 it was again decreased
by 1.48. During this year, i.e. 2011-2012 it was about 2.17:1. These show that the
current ratio was decreased every year.But in the last year,i.e. 2012-2013 the current
ratio was increased to 2.48:1, due to increase in current assets. The current ratio is
greater to the standard ratio, i.e. 2:1. Hence it can be said that there are enough current
assets in Marathon Electric India Pvt. Ltd. to meet its current liabilities.

1.2 Acid Test Ratio /Quick Ratio / Liquidity Ratio

The Acid test ratio/Quick ratio/Liquidity ratio establishes a relationship between
quick/liquid assets and current liabilities. It measures the firms capacity to pay off the
current obligation immediately. An asset is liquid if it can be converted into cash
immediately without a loss of value; Inventories are considered to be less liquid.
Becauseinventorysnormally require some time for converting into cash. This ratio is
also known as an acid-test ratio. The standard quick ratio is 1:1 is considered
satisfactory.

37
 Quick Ratio = Quick Assets (current assets Inventory)

Current Liabilities

Table showing Quick Ratio

Year CurrentAssets Inventories Quick Assets Current Quick Ratio
Liabilities
2009-2010 20,915.61 4,213.05 16,702.56 4,930.54 3.38

2010-2011 20,743.18 5,759.21 14,983.97 5,678.34 2.63

2011-2012 22,775.58 5,875.76 16,899.82 10,459.17 1.61

2012-2013 28,195.36 5,240.57 22,954.79 11,337.50 2.02

Source: Financial statement (Amount in lakh)

Quick Ratio
4
3.5
3
2.5
Quick Ratio
2
1.5
1
0.5
0
2009-2010 2010-2011 2011-2012 2012-2013

(Amount in lakh)

Interpretation
The above chart shows that during the financial year 2009-2010 the company had a
Quick ratio of 3.38:1. In the next year, i.e.2010-2011 it decreasesby 0.75. It was about
2.63:1 in the year 2010-2011. During the year 2011-2012 the quick ratiowas
againdecreasedby1.02. And it was about1.61:1 in the year 2011-2012 due to increase
in current liabilities and decrease in Quick assets. But in the last year 2012-2013 the
quick ratio increased by 0.41. And it was increased to 2.02:1. The quick ratio of the

38
 company is greater to the standard ratio, i.e., 1:1. Hence it shows that the liquidity
position of the company is adequate.

1.3Absolute Liquidity Ratio

The absolute liquidity ratio may be defined as the relationship between Absolute
liquid assets and current liabilities. Absolute liquid ratio includes cash in hand and
cash at bank. The standard ratio is 0.5:1.

Absolute Liquidity Ratio = Cash & Bank Balance

Current Liabilities

Table Showing Absolute Liquidity Ratio

Year Cash & Bank Balance Current Liability Absolute Liquidity Ratio

2009-2010 4,516.04 4,930.54 0.91

2010-2011 396.01 5,678.34 0.06

2011-2012 1,607.07 10,459.17 0.15

2012-2013 5,098.44 11,337.50 0.44

Source: Financial statement (Amount in lakh)

39
 Absolute Liquidity Ratio
1
0.9
0.8
0.7
0.6 Absolute Liquidity Ratio
0.5
0.4
0.3
0.2
0.1
0
2009-2010 2010-2011 2011-2012 2012-2013

(Amount in lakh)

Interpretation
The above chart shows that during the financial year 2009-2010 the absolute liquidity
ratio of the company was about 0.91:1.In the next year 2010-2011 it decreased by
0.85.It was about 0.06:1, in the year 2010-2011.In the year2011-2012 absolute
liquidity ratio increased by 0.09, and it was about0.15:1, in the year 2011-2012. In the
last year,i.e. 2012-2013 it increased by 0.29, and it was about0.44:1. After 2010-2011
the absolute liquidity ratio of the company is increasingevery year. But besides of
2009-2010 the absolute liquidity ratio of the company is less thanto the standard rate
i.e., 0.5:1. Hence it shows that the liquidity position of the company is satisfactory.

2.1.Inventory Turnover Ratio

The Inventory turnover ratio is the ratio, which indicates the number of times the
stock is turned over i.e., sales during the year. This measures the efficiency of the
sales and stock levels of the company. A high ratio means high sales, fast stock
turnover, and a low stock level. A low stock turnover ratio means the business slows
down or with a high stock level.

Inventory Turnover Ratio = Net sales

Closing Inventory

40
 Table showing the Inventory turnover ratio
Year Net Sales Closing Inventory Inventory Turnover Ratio

2009-2010 37,102.41 4,213.05 8.80 Times

2010-2011 49,374.65 5,759.21 8.57 Times

2011-2012 52,052.91 5,875.76 8.85 Times

2012-2013 55,254.01 5,240.57 10.54 Times

Source: Financial statement (Amount in lakh)

Inventory turnover ratio

12

10

8
Inventory turnover ratio
6

0
2009-2010 2010-2011 2011-2012 2012-2013

(Amount in lakh)

Interpretation
The above chart shows that during the financial year 2009-2010, 2010-2011, and
2011-2012 in all three years there is no major differencein the inventory turnover
ratio, which is in all three years, the inventory turnover ratio was about 8.80
times,8.57 times, and 8.85 times, respectively.But in the last year, i.e. 2012-2013 it
increased by 1.69 times as compared to the previous year, i.e. 2011-2012. And it was
about 10.54 times in the year 2012-2013. It shows that in all three years the company
had general sales, but in the last year 2012-2013 the company increased in its sales as
compared to last three previous years i.e. 2009-2010, 2010-2011, and 2011-2012.
41
 2.2 Debtors/Account receivable Turnover Ratio
The Debtors/Account receivable turnover ratio indicates the speed of debt collection
of the firm. This ratio computes the number of times debtors (receivables) has been
turned over during the particular period.

Debtors Turnover Ratio = Net sales

Average Debtors
Note: In MEIPL, we have taken the total net sales instead of the credit sales, because
the credit sales information has not available for the calculation of Debtors Turnover
Ratio.

Table showing the Debtors turnover ratio

Year Net Sales Average Debtors Debtors Turnover Ratio

2009-2010 37,102.41 6,433.77 5.76 Times

2010-2011 49,374.65 7,653.72 6.45 Times

2011-2012 52,052.91 8,461.06 6.15 Times

2012-2013 55,254.01 10,904.96 5.06 Times

Source: Financial statement (Amount in lakh)

Debtors turnover ratio

7

4 Debtors turnover ratio

0
2009-2010 2010-2011 2011-2012 2012-2013

42
 (Amount in lakh)

Interpretation
The above chart shows that the debtor turnover ratio is fluctuating over the years. It
was about 5.76 times in the year 2009-2010. It increased by 0.69 times in the year
2010-2011. It was about 6.45 times in the year 2010-2011. But in the year 2011-2012
it was decreased by0.30 times, and it was about 6.15 times in the year 2011-2012.
During the next year, i.e. 2012-2013 it was 5.06 which again decreased by 1.09 times
as compared to the last year i.e. 2011-2012. This graph is showing that the company is
not collecting debt rapidly.

2.3. Creditors/Account payable Turnover Ratio

The creditors turnover ratio is the ratio, which indicates the number of times the
debts are paid in the year. This ratio is calculatedto be as follows:

Creditors Turnover Ratio = Net Purchases

Average Creditors

Note: In the MEIPL, we have taken the cost of materials consumed instead of credit
purchases, because the credit purchase information has not available for the
calculation of Creditors Turnover Ratio.

Table showing the creditors turnover ratio

Year Net Purchases Average Creditors Creditors Turnover Ratio

2009-2010 21,711.73 4,022.49 5.39 Times

2010-2011 30,560.39 4,416.68 6.91 Times

2011-2012 30,864.81 6,048.81 5.10 Times

2012-2013 30,195.25 4,616.96 6.54 Times

Source: Financial statement (Amount in lakh)

43
 Creditors Turnover Ratio
8

5
Creditors Turnover Ratio
4

0
2009-2010 2010-2011 2011-2012 2012-2013

(Amount in lakh)

Interpretation
The above chart shows that the creditors turnover ratio is fluctuating over the years.
It was about 5.39 times in the year 2009-2010.During the next year, i.e. 2010-2011 it
was increased by 1.52 times.During that year the creditors turnover ratio was about
6.91 times. But in the next year 2011-2012 it was decreased by 1.81 times and it was
about 5.10 times in the year 2011-2012. During the last year, i.e. 2012-2013 it was
about 6.54 times, which due to decreasein creditors. This chart is showing that the
company has made prompt payment to the creditors.

2.4. Working Capital Turnover Ratio

TheWorking Capital Turnover Ratio indicates the number of times the working capital
is turned over in the course of the year. This ratio measures the efficiency with which
the working capital is used by the firm. A higher ratio, efficient utilization of working
capital and a low ratio indicates inefficient utilization of the working capital. But a
very high working capital turnover ratio is not a good situation for any company.

Working Capital Turnover Ratio = Net Sales

Net Working Capital

Table showing the working capital turnover ratio

44
 Year Net Sales Net Working Capital Working capital Turnover Ratio

2009-2010 37,102.41 15,985.07 2.32 Times

2010-2011 49,374.65 15,064.84 3.27 Times

2011-2012 52,052.91 12,316.41 4.22 Times

2012-2013 55,254.01 16,858.86 3.27 Times

Source: Financial statement (Amount in lakh)

Working Capital Turnover Ratio

4.5
4
3.5
3
Working Capital Turnover
2.5
Ratio
2
1.5
1
0.5
0
2009-2010 2010-2011 2011-2012 2012-2013

(Amount in lakh)

Interpretation
The above chart shows that the working capital turnover ratio is fluctuating year to
year that was minimum in the year 2009-2010,about 2.32 times. There was a
subsequent increase in the year 2010-2011 from 0.95 times, and it was about 3.27
times. It was again increased in the year 2011-2012 from0.95 times, due to decrease in
net working capital.It was about 4.22 times in the year 2011-2012. But in the last year
i.e. 2012-2013 it was decreased by 0.95 times, due to increase in net working capital.
During that year the working capital turnover ratio was about 3.27 times. This chart
shows that the company is utilizing working capital effectively.

45
(C) Fund Flow Statements

Principles of working capital for calculating purposes

Current Assets
If the current assets increase as a result of this, working capital also increases. If the
current assets decrease as a result of this, working capital also decreases.

Current liabilities
If the current liabilities increase as a result of this, working capital also decreases. If
the current liabilities decrease as a result of this, working capital also increases.

Statement of Change in Working Capital:

The purpose of preparing this statement is for finding out the increase or decrease in
working capital and to make a comparison between two financial years.

46
 Table 1:

Statement of Change in Working Capital of the Year

2009-2010

AS on AS on Effect on Working capital

Particulars 31-03-2009 31-03-2010 Increase Decrease

CURRENT
ASSETS
Inventories 3,728.40 4,213.05 484.65 -

Sundry Debtors 6,397.39 6,433.77 36.38 -

Cash & Bank Balance 7,473.83 4,516.04 - 2,957.79
Loans and Advances 6,421.70 5,752.73 - 668.97
(A) Total Current 24,021.34 20,915.61
Assets
CURRENT
LIABILITIES
Current Liabilities 7,444.64 4,099.77 - 3,344.87
Provisions 796.29 830.83 34.54 -
(B) Total current 8,240.93 4,930.54
Liabilities
(A)-(B) Net Working
Capital 15,780.41 15,985.07 - -
Decrease in Working
Capital - 6,416.06 6,416.06 -

TOTAL 32,262.27 32,262.27 6,971.63 6,971.63

Source: Financial statement (Amount in lakh)

47
Interpretation
In the above table, it is seen that during the financial year 2009-2010 there was a net
decrease in working capital of Rs.6, 416.06 lakh which indicates that there is not an
adequate working capital in Marathon Electrical India Pvt. Ltd.

This is because of:-

Increase Current Assets such as Inventories by Rs.484.65lakh and other such

as Sundry debtors by Rs.36.38 lakh.

Decrease in Cash & Bank Balance by Rs.2, 957.79 lakh. And other current
assets such as Loans and Advances by Rs.668.97 lakh.

Decrease in Current Liabilities by Rs.3, 344.87lakh.

Increase in provisions by Rs.34.54 lakh.

Table 2:
48
 Statement of Change in Working Capital of the Year

2010-2011
AS on AS on Effect on Working capital
Particulars 31-03-2010 31-03-2011 Increase Decrease

CURRENT ASSETS

Inventories 4,213.05 5,759.21 1,546.16 -

Sundry Debtors 6,433.77 7,653.72 1,219.95 -

Cash & Bank Balance 4,516.04 396.01 - 4,120.03

Loans and Advances 5,752.73 6,934.21 1,181.48 -

(A) Total Current Assets 20,915.61 20,743.18

CURRENT
LIABILITIES

Current Liabilities 4,099.77 4,717.48 617.71 -

Provisions 830.83 960.86 130.03 -

(B) Total current 4,930.54 5,678.34

Liabilities

(A)-(B) Net Working - -

Capital 15,985.07 15,064.84
Increase in Working 575.37 - - 575.37
Capital

26,421.52 26,421.52 4,695.33 4,695.33

TOTAL

Source: Financial statement (Amount in lakh)

Interpretation
49
In the above table, it is seen that during the financial year 2010-2011 there was a net
increase in working capital of Rs.575.37 lakh. It indicates that an adequate working
capital in Marathon Electrical India Pvt. Ltd.

This is because of:-

Increase in Current Assets such as Inventories by Rs.1, 546.16 lakh, Sundry

debtors by Rs.1, 219.95 lakh, and Loans and advances by Rs.1, 181.48 lakh.

Decrease in Cash and bank balance of Rs.4, 120.03.

Increase in Current Liabilities by Rs 617.71lakh, and Provisions by Rs.130.03

lakh.

Table 3:

Statement of Change in Working Capital of the Year

2011-2012
50
 AS on AS on Effect on Working capital
Particulars 31-03-2011 31-03-2012 Increase Decrease

CURRENT ASSETS

Inventories 5,759.21 5,875.76 116.55 -

Trade Receivables 7,653.73 8,461.06 807.33 -

Cash & Bank Balance 396.01 1,607.07 1,211.06 -
Loans and Advances 5,258.50 5,223.86 - 34.64
Other Current Assets 1,675.73 1,607.83 - 67.90
(A) Total Current Assets 20,743.18 22,775.58 - -

CURRENT
LIABILITIES
Trade Payables 4,313.68 4,616.96 303.28 -
Short term Borrowings - 3,265.20 3,265.20 -
Provisions 960.86 154.64 - 806.22
Other Current Liabilities 403.80 2,422.37 2,018.57 -
(B) Total current 5,678.34 10,459.17 - -
Liabilities
(A)-(B) Net Working 15,064.84 12,316.41 - -
Capital
Increase in Working 6,813.23 - - 6,813.23
Capital
33,234.75 33,234.75 7,721.99 7,721.99
TOTAL

Source: Financial statement (Amount in lakh)

Interpretation
In the above table, it is seen that during the financial year 2011-2012 there was a net
increase in working capital of Rs.6, 813.23 lakh. It indicates that an adequate working
capital in Marathon Electrical India Pvt. Ltd.
51
This is because of:-

Increase in Current Assets such as Inventories by Rs.116.76 lakh, Trade

Receivable by Rs.807.33 lakh, and Loans and advances by Rs.1, 211.06 lakh.
Decrease in Cash and bank balance of Rs.34.64 lakh, and other Current Assets
by Rs.67.90 lakh.

Increase in Current Liabilities, such as Trade Payables by Rs.303.28 lakh,

short-term Borrowing by Rs.3, 265.20 lakh, and other Current Liabilities by
Rs.2, 018.57 lakh.

Decrease in Provisions by Rs.806.22 lakh.

Note:

According to Company Law, there were some changes in Schedule VI. These changes
were effective from 01 April11. Some changes in Balance Sheet for the financial year
2011-2012 such as:

In Current Assets, current assets are divided into two parts such as Current
assets and Non-Current assets. Loans and Advances are divided in two parts
such as Short-term loans and advances and Long term loans and advances.
Short-term loans and advances include in Current Assets and Long-term loans
and advances include in noncurrent assets. And added some entries such as
other current assets.

In Current Liabilities added some entries such as Short-term Borrowing and

other current liabilities.

Table 4;

Statement of Change in Working Capital of the Year

2012-2013

52
 AS on AS on Effect on Working capital
Particulars 31-03-2012 31-03-2013 Increase Decrease

CURRENT ASSETS

Inventories 5,875.76 5,240.57 - 635.19

Trade Receivables 8,461.06 10,904.96 2,443.90 -

Cash & Bank Balance 1,607.07 5,098.44 3,491.37 -
Loans and Advances 5,223.86 4,592.60 - 631.26
Other Current Assets 1,607.83 2,358.79 750.96 -
(A) Total Current Assets 22,775.58 28,195.36 - -

CURRENT
LIABILITIES
Trade Payables 4,616.96 6,048.81 1,431.85 -
Short term Borrowings 3,265.20 3,530.58 265.38 -
Other Current Liabilities 2,422.37 1,521.16 - 901.21
Provisions 154.64 236.95 82.31 -
(B) Total current 10,459.17 11,337.50 - -
Liabilities
(A)-(B) Net Working 12,316.41 16,857.86 - -
Capital
Increase in Working 6,298.11 - - 6,298.11
Capital
39,532.86 39,532.86 8,465.77 8,465.77
TOTAL

Source: Financial statement (Amount in lakh)

Interpretation
In the above table, it is seen that during the financial year 2012-2013 there was net
increasing in working capital of Rs.6, 298.11 lakh. It indicates that an adequate
working capital in Marathon Electrical India Pvt. Ltd.
53
This is because of:-

Increase in Current Assets such as Trade Receivable by Rs.2, 443.90 lakh,

Cash, and bank balance of Rs.3, 491.37 lakh. And other Current Assets by
Rs.750.96 lakh.
Decrease in Current Assets such as Inventories by Rs.635.19 lakh, and Loans
and advances by Rs.631.26 lakh.

Increase in Current Liabilities, such as Trade Payables by Rs.1, 431.85 lakh,

Short-term Borrowing by Rs.265.38 lakh, and Provisions by Rs.82.31lakh.

Decrease in other Current Liabilities by Rs.901.21 lakh.

54
 CHAPTER 5
FINDINGS
AND
CONCLUSIONS

FINDINGS
Working capital of Marathon Electric India Pvt. Ltd was decreasing every
year showing the negative working capital, besides of 2012-2013. After that
the company is higher than standard rate, i.e. 2:1, and the position of the
company is satisfactory.

55
 The Marathon Electric India Pvt. Ltd. hada higher Current ratio being 4.24:1
and Quick ratio was 3.38:1.

The MEIPL hadan Absolute liquidity ratiovery low in the year 2010-2011.
During the next year, it was increased by 0.09 times as compared to 2010-
2011. And in the last year, i.e. 2012-2013 it was again increased.

The MEIPL had an inventory turnover ratio very low in the year 2010-2011.
During the next year, it was increased by 0.28 times as compared to 2010-
2011.And in the last year, i.e. 2012-2013 it was again increased.
The MEIPL had Debtors turnover ratio very high in the year 2010-2011.
During the next year, it was decreased by 0.30 times as compared to 2010-
2011.And in the last year, i.e.2012-2013 it was again decreased.

The Creditors turnover ratio of MEIPL was fluctuating year to year. It was
very high in the year 2010-2011. During the next year, i.e. 2011-2012 it was
decreased by 1.81 times as compared to 2010-2011. And in the last year 2012-
2013 it was again increased.

The MEIPL hada working capital turnover ratio very low in the year 2009-
2010. During the next two years, i.e. 2010-2011 & 2011-2012, it was
increased by 0.95 & 0.95 times respectively, as compared to the previous year,
i.e.2009-2010. And in the last year, i.e. 2012-2013 it was decreased by 0.95
times as compared to the previous year, i.e. 2011-2012.

CONCLUSIONS

The study on working capital management conducted in Marathon Electric

India Pvt. Ltd. to analyze the financial position of the company. The
companys financial position is analyzed by using the tool of financial
statements from 2009-2010 to 2012-2013.

The financial status of Marathon Electric India Pvt. Ltd is good. In the last
year i.e., 2012-2013 the inventory turnover ratio has increased, this is a good
sign for the company.

56
 The companys liquidity position is not good with regard to the investment in
current assets as there are adequate funds invested in it.

The company is managing its financial position in a better way. There is a

balance between Current assets and current liabilities and also current ratio is
always above the standard rate.

Further, Companys creditors turnover ratio is not so good because of this

company may face the shortage of the funds to pay off its debts. To avoid such
situation, companies should use their funds in a productive way and there
should be timely payment of creditors.

Company net working capital is decreasing, but in the last year i.e., 2012-2013
it was increased, still the company is in a better management position, and the
company present status of maintaining current liabilities and current assets is
satisfactory.

They are able to manage their cash, funds, and debts. By adopting better
management practices, the company may attain a sound financial position in
the future and will be able to manage its working capital very effectively and
efficiently.

LIMITATIONS OF THE STUDY

The study is conducted in very short duration (summer training).

The analysis is limited to just 4 years of data study (from 2009 to 2013) for
financial analysis.

Limited interaction with the concerned head due to their busy schedule.

The findings of the study are based on the information retrieved from the
selected unit.

Very less information and time spent with the company staff.

This study is done on the basis of the historical data not in the actual
workplace.

57
 The financial data sensitive in nature the same could not acquire easily.

Every personhas its own preparation to analyze the financial data so maybe it
varies from person to person.

The companyhas not provided their financial data properly because of it is

confidential in nature.

APPENDICES
Balance sheet and

Profit and loss account of the company

Marathon Electric India Pvt. Ltd.

Provisional Balance sheet as at 31st March 2012

SOURCES OF CURRENT PREVIOUS

FUNDS YEAR YEAR
(2012) (2011)
Equity and
Liabilities
Shareholders
Funds
Share capital 332.00 312.00

Reserves and 27614.01 24630.37

surplus
27946.01 24942.37
Non-current
liabilities
58
Long-term - 4.00
borrowings
Long-term 916.34 823.20
provisions
916.34 827.20
Current
liabilities
Short-term 3265.20 5314.36
borrowings
Trade payables 4616.96 4313.68

Other current 2422.37 415.54

liabilities
Short-term 154.64 137.66
provisions
Total current 10459.17 10181.24
liabilities
Total funds 39321.52 35950.81
employed
Assets

Non-current
assets
Fixed assets

Tangible assets 14107.94 14117.31

Intangible assets 112.64 -

14220.58 14117.31

Capital work in 442.57 96.39

progress
14663.15 14213.70

Deferred tax assets 1760.02 799.88

(net)
Long-term Loans 1739.84 1968.14
and advances
3499.86 2768.02

Current Assets

Inventories 5875.76 5759.21

Trade receivable 8461.06 7653.73

59
Cash and bank 1607.07 396.01
balances
Short-termLoans 3606.79 3484.41
and advances
Other current assets 1607.83 1675.73

Net Current 21158.51 18969.09

Assets
Total 39321.52 35950.81
application of
Funds
Source: Financial statement (Amount in lakh)

Marathon Electric India Pvt. Ltd.

Provisional Balance sheet as at 31st March 2013

SOURCES OF CURRENT PREVIOUS

FUNDS YEAR YEAR (2012)
(2013)

Equity and
Liabilities
Shareholders
Funds
Share capital 332.00 332.00

Reserves and 31360.10 27614.01

surplus
31692.10 27946.01

Non-current
liabilities
60
Long-term 994.90 916.34
provisions
994.90 916.34

Current
liabilities
Short-term 3530.58 3265.20
borrowings
Trade payables 6048.81 4616.96

Other current 1521.16 2422.37

liabilities
Short-term 236.95 154.64
provisions
Total current 11337.50 10459.17
liabilities
Total funds 44024.50 39321.52
employed
Assets

Non-current
assets
Fixed assets

Tangible assets 13589.42 14107.94

Intangible assets 71.06 112.64

13660.48 14220.58

Capital work in 531.52 442.57

progress
14192.00 14663.15

Deferred tax assets 1409.50 1760.02

(net)
Long-term Loans 2132.65 1739.84
and advances
3542.15 3499.86

Current Assets

Inventories 5240.57 5875.76

Trade receivable 10904.96 8461.06

61
Cash and bank 5098.44 1607.07
balances
Short-term Loans 2687.59 3606.79
and advances
Other current assets 2358.79 1607.83

Net Current 26290.35 21158.51

Assets
Total 44024.50 39321.52
application of
Funds
Source: Financial statement (Amount in lakh)

BIBLIOGRAPHY
Following sources have been sought for the preparation this project report-

Company profile

Annual reports of the company from 2009-2010 to 2012-2013

Direct interaction with the employees of the company.

Internet-

www.marathonelectric.in
www.google.com
www.wikipidea.org

62
63