JAYAPRAKASH NARYAN COLLEGE OF

ENGNEERING SCHOOL OF MANAGEMENT

STUDIES MAHABUBNAGAR-509 001

A PROJECT STUDY ON WORKING CAPITAL

WITH REFERENCE TO

Dissertation submitted to the department of school of management studies-

JPNCE In partial fulfillment of the requirements for the awarded of the
degree of

MASTER OF BUSINESS ADMINSTRASTION (Finance)

By
Mr. SYED MOHAMMED SHAHNAWAZ
16361E0034
To

JAWAHARLAL NEHURU TECHNOLOGICAL UNIVARSITY,

HYDERABAD.

1
 Abstract

Working capital of a corporation reveals additional regarding the condition of a

business than nearly the other calculation. It tells you what would be left if a
corporation raised all of its short term resources, and used them to pay off its short term
liabilities. The additional assets, the less monetary strain a corporation experiences.
assets additionally provides investors a thought of the company's underlying
operational potency. cash that's bound in inventory or cash that customers still owe to
the corporate cannot be accustomed pay off any of its obligations. So, if a corporation
isn't operational within the most effective manner (slow collection) it'll show up within
the assets. this {may} be seen by scrutiny the assets from one amount of your time to
Another; slow assortment may signal an underlying drawback within the company's
operations
Cash is that the lifeline of a corporation. If this lifeline deteriorates, the company's
ability to fund operations, reinvest and meet capital needs and payments additionally
deteriorate. Understanding a company's income health is important for creating
investment selections. an honest thanks to decide a company's income prospects is to
seem at its assets management (WCM).

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 CHAPTER-I

INTRODUCTION

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INTRODUCTION

WORKING CAPITAL:
Cash is that the lifeline of a corporation. If this lifeline deteriorates, the company's
ability to fund operations, reinvest and meet capital needs and payments additionally
deteriorate. Understanding a company's income health is important for creating
investment selections. an honest thanks to decide a company's income prospects is to
seem at its assets management (WCM).
Working capital of a corporation reveals additional regarding the condition of a
business than nearly the other calculation. It tells you what would be left if a
corporation raised all of its short term resources, and used them to pay off its short term
liabilities. The additional assets, the less monetary strain a corporation experiences.
assets additionally provides investors a thought of the company's underlying
operational potency. cash that's bound in inventory or cash that customers still owe to
the corporate cannot be accustomed pay off any of its obligations. So, if a corporation
isn't operational within the most effective manner (slow collection) it'll show up within
the assets. this {may} be seen by scrutiny the assets from one amount of your time to
Another; slow assortment may signal an underlying drawback within the company's
operations.

DEFINITION
The definition of assets is that it's the distinction between AN organization’s current
assets and its current liabilities. Of additional importance is its operate that is primarily
to support the day-after-day monetary operations of a corporation, as well as the
acquisition of stock, the payment of salaries, wages and alternative business expenses,
and therefore the finance of credit sales. It’s a live of each a company's potency and its
short-run monetary health.
The better a corporation manages its assets, the less the corporate must borrow. Even
firms with money surpluses ought to manage assets to confirm that those surpluses
square measure invested with in ways in which can generate appropriate returns for
investors.

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There square measure 2 ideas of assets. They are
→ Gross assets and
→ Net assets.

The term gross assets, additionally named as assets means that the full current assets.

The term internet assets will be outlined in 2 ways:

• The most typical definition of internet assets is that the distinction between the
present assets and therefore the current liabilities.

• The alternate definition of NWC is that portion of current assets that is supported with
future funds. Since the present liabilities represent the sources of short term funds, as
long as current assets exceed current liabilities, the surplus should be supported with
future funds.

The net assets, as a live of liquidity is sort of helpful for control. Infobahn assets helps
in scrutiny the liquidity of identical firm over time.

Therefore:
Current Assets - Current Liabilities = assets
A positive assets implies that the corporate is in a position to pay off its short-run
liabilities. A negative assets implies that a corporation presently is unable to fulfill its
short-run liabilities with its current assets (cash, assets, inventory).
Management should make sure that a business has enough assets. deficient of the assets
can end in income issues highlighted by a corporation surpassing its in agreement bill
of exchange limit, failing to pay suppliers on time, and being unable to say discounts
for prompt payment. within the long-standing time, a business with inadequate assets
are unable to fulfill its current obligations and can be forced to stop commercialism
although it remains profitable on paper.

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On the opposite hand, if a corporation ties up an excessive amount of of its resources in
assets it'll earn a not up to expected rate of come back on capital utilized. once more
this is often not a fascinating scenario.
As it is claimed that assets is that the distinction between the present assets and
therefore the current liabilities, the management of the corporate has got to manage
their current assets and current liabilities.

Need of the study

Assets management is one amongst the key areas of monetary decision-making. it's
vital as a result of, the management should see that AN excessive investment in current
assets ought to defend the corporate from the issues of stock-out. Current assets also
will verify the liquidity position of the firm.

The goal of assets management is to manage the firm current assets and current
liabilities in such some way that a satisfactory level of assets is maintained. If the firm
cannot maintain a satisfactory level of assets, it's possible to become insolvent and
should be even forced out of business.

SCOPE OF THE STUDY:

A study of the assets involves AN examination of future in addition as short term

sources that a corporation faucets so as to fulfill its needs of finance. The scope of the
study is confined to the sources that KOTAK MAHINDRA LTD abroach over the years
underneath study i.e. 2013-17.

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OBJECTIVES OF THE STUDY

To study the prevailing capital management system of KOTAK MAHINDRA LTD.

(Formerly KOTAK MAHINDRA LTD.).

To notice the liquidity position of this assets and current liabilities of the corporate.

To examine practicability of gift system of managing capital.

To perceive however the corporate finances its capital

To analyze the money performance of the corporate with relation to capital.

To offer some suggestions to the management supported the knowledge studied.

METHODOLOGY

• The study of capital management relies on primary in addition as secondary

information.
Data about. Has been collected through

SECONDARY SOURCES:

Published annual reports of the corporate for the year 2013-17.

PRIMARY SOURCES:

Detailed discussions with Vice-President.

Discussions with the Finance manager and different members of the Finance department.

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DATA ANALYSIS
The collected information has been processed victimisation the tools of

• Ratio analysis
• Graphical analysis
• Year-year analysis

These tools access within the interpretation and understanding of the prevailing state of
affairs of the Capital Structure.

• The primary information was gathered through personal interaction with the director
of the corporate.

• The secondary information was collected from company’s annual reports from 2012-
13 to 2016-17, varied books and net.

LIMITATIONS

Due to the busy schedule of the executives within the company, all the specified
primary information couldn't be collected, which could have an effect on the results of the
study.

Recommendations of the study square measure solely personal opinions. therefore the
judgments is also biased and will not be thought of as final and normal solutions.

Short amount of your time is one among the constraints, thanks to that an in depth
study couldn't be conducted on the subject

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 CHAPTER-II
REVIEW OF LITERATURE

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WORKING CAPITAL MANAGEMENT

Management of assets plays a really necessary role within the monetary management of a
corporation as a result of maintaining a balance of financial gain to debt are often
troublesome and house owners should be diligent to assure that it's unbroken. generally it
takes a bit help to keep up levels of runniness or create major purchases.
If assets dips too low, a business risks running out of money. Even terribly profitable
businesses will run into hassle if they lose the power to fulfill their short obligations. assets
funding are often used as a quick money choice to cushion the periods once the flow isn't
ideal or without delay out there. Even once house owners area unit meticulous in managing
assets, finding the proper levels to stay comfy and competitive are often troublesome.
The Importance of fine assets Management
Working capital constitutes a part of the Company’s investment in an exceedingly
department. related to this can be a chance value to the corporate. (Money endowed in one
space could "cost" opportunities for investment in alternative areas.) If a department is
working with a lot of assets than is important, this over-investment represents associate
degree inessential value to the corporate
From a department's purpose of read, excess assets means that operative inefficiencies.
additionally, inessential assets will increase the number of the capital charge that departments
area unit needed to fulfill

OBJECTIVES OF MANAGING

• Describe the risk-return trade-off concerned in managing a firm's assets.

• Explain the determinants of web assets.
• Calculate the effective value of short credit.
• List and describe the essential sources of short credit.
• Describe the special issues encountered by international corporations in managing

Working capital management takes place on 2 levels:

• Ratio analysis are often wont to monitor overall trends in assets and to spot areas
requiring nearer management
• The individual elements of assets are often effectively managed by mistreatment
numerous techniques and methods

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When considering these techniques and methods, departments got to acknowledge that every
department encompasses a distinctive mixture of assets elements. the stress that has to be
placed on every element varies in step with department.
Furthermore, assets management isn't associate degree finish in itself. it's associate degree
integral a part of the department's overall management. the requirements of economical assets
management should be thought-about in relevancy alternative aspects of the department's
monetary and non-financial performance.
assets quantitative relation
Current Assets divided by Current Liabilities
The assets quantitative relation (or current ratio) tries to live the amount of liquidity, that is,
the amount of safety provided by the surplus of current assets over current liabilities.
The "quick ratio" a by-product, excludes inventories from this assets, considering solely those
assets most fleetly realizable. There also are alternative potential refinements.
There is no explicit benchmark worth or vary that may be counseled as appropriate for all
government departments. However, if a department tracks its own assets quantitative relation
over a amount of your time, the trends-the manner during which the liquidity is changing-will
become apparent.
Current assets:
The term current assets visit those assets that within the normal course of business are often,
or will be, born-again into money at intervals one year while not beneath going any
diminution within the worth and while not disrupting the operations of the firm. the foremost
current assets area unit money, certificate of indebtedness, marketable securities, assets,
inventory, paid expenses and alternative short term investments.
Debtors
Debtors area unit folks or alternative corporations United Nations agency owe cash to the
firm. this can typically happen wherever the firm has sold merchandise with a amount of
credit. The firm sells the nice or service however permits the customer a amount of credit to
pay - typically a month. throughout this month the customer owes the firm the money and is
so a individual.
If the firm has debts these area unit thought-about associate degree plus, as a result of once
the debtors pay the firm can have born-again the debt into make the most the bank. as a result
of most debts area unit comparatively short they're thought-about current assets the number
of debtors a firm has depends on the road of business they're in.
CASH

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In a business the term money could have a broader that means. money is associate degree
plus to the business and is sometimes thought-about to be one among this assets. beneath the
heading money on the record could also be enclosed variety of things of varied liquidity.
atiny low quantity may very well be money (or readies) command in tills or as monetary
fund, however the bulk is probably going to be command in numerous bank accounts.
However, since cash in current accounts seldom earns interest, if a business encompasses a
surplus of money it's going to invest it in numerous ways in which. Some can need to be in
terribly liquid accounts so if necessary they will get at it terribly quickly, however some
could also be affianced for extended periods of your time.
Inventory
Inventory is additionally a current plus which may be either raw materials, finished things out
there purchasable, or merchandise within the method of being factory-made. Inventory is
recorded as associate degree plus on a company's record.
Raw material
An item wont to turn out one thing else is termed a "raw material." Some raw materials area
unit simple to identify, however several need detecting. material of a corporation could also
be foreign or endemic. material ought to be managed in such the way that flow of production
isn't interrupted. rearrangement amount and time ought to be calculable in an exceedingly
correct manner.

Work in method
An operation consists of processes designed to feature worth by reworking inputs into helpful
outputs. Inputs could also be materials, labor, energy, and capital instrumentality. Outputs
could also be a physical product (possibly used as associate degree input to a different
process) or a service. Processes will have a major impact on the performance of a business,
and method improvement will improve a firm's fight.
Finished merchandise
Definition: Commodities that may not endure additional process and area unit prepared
purchasable to the ultimate demand user, either a private shopper or firm. This includes
unprocessed foods like eggs and contemporary vegetables, additionally as processed foods
like workplace merchandise and meats.
This conjointly includes consumer durables like cars, menage article of furniture and
appliances, and unserviceable merchandise like attire and residential fuel oil.
Prepaid Expenses:

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In the course of each day operations, businesses can need to pay money for merchandise or
services before they really receive the merchandise generally corporations conceive to pay
taxes, salaries, utility bills, rent, or the interest on their debt. These would all be pooled along
and placed on the record beneath the heading paid expenses. By their terribly nature, paid
Expenses area unit atiny low a part of the record
Current liabilities
The term current liabilities area unit those liabilities that area unit supposed at the time of
their origin, to be paid within the normal course of business, at intervals a year, out of this
assets or earnings of the priority. the essential current liabilities area unit accounts owed, bills
owed, bank bill of exchange and outstanding expenses and alternative short term debts.
Creditors:
Creditors (Accounts Payable) area unit suppliers United Nations agencyse invoices for
merchandise or services are processed however who haven't nevertheless been paid.
In alternative words, creditors area unit folks to whom the corporate owes the money.
The term somebody is often utilized in the monetary world, particularly in relation to short
term loans, long run bonds, and mortgages.
The term somebody derives from the notion of credit. In fashionable America, credit refers to
a rating that indicates the power of a receiver and probability to pay back his or her loan. In
earlier times, credit conjointly observed name or trustiness.
Classification of Current Assets and Current Liabilities
The current classification applies to those assets that may be complete in money, sold, or
consumed at intervals one year (or operative cycle, if longer), and people liabilities that may
be discharged by use of current assets or the creation of extra current liabilities at intervals
one year (or operative cycle, if longer). this liability section of a record is additionally
supposed to incorporate obligations that area unit due on demand or are going to be due on
demand at intervals one year from the record date, although liquidation might not be expected
at intervals that amount. short obligations shall be excluded from current liabilities on
condition that the enterprise intends to finance the duty on a long basis and has the
incontestable ability to consummate the funding.
The ordinary operations of a business involve a circulation of capital at intervals this plus
cluster. money is spent for materials, labor, operative expenses, and alternative services, and
such money expenditures area unit enclosed within the inventory worth. Upon sale of the
merchandise or performance of services, the accumulated expenditures area unit born-again
into assets and ultimately into money once more. the typical amount of your time intervening

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between the cash-to-cash conversion is that the operative cycle of the business. once the
business has no clear operative cycle, or once the operative cycle is shorter than fourteen
months, a 14-month amount ought to be wont to segregate current assets.
This concept of the character of current assets would exclude from that classification such
resources as 1) money and claims to money that area unit restricted on withdrawal or
alternative use for current operations; 2) investments in securities (whether marketable or not)
or advances that are created for the aim of management, affiliation, or alternative business
advantage; 3) money surrender worth of life insurance; 4) depreciable assets; 5) long
receivables; and 6) land.
For analytical functions, specific recommendations of the FFSC are:
1. Principal debt due at intervals fourteen months, even on notes with monthly
payments, ought to be enclosed as a current liability.
2. Capital leases ought to be accounted for on the record, with this portion of the
principal due and therefore the accumulated interest shown as a current liability.
3. Money worth of insurance ought to be a non-current plus.
4. Loans to relations ought to be treated supported the characteristics of the notes. (The
quantity of those loans ought to be on an individual basis disclosed, if material.)
5. PIK certificates ought to be treated as current assets.
6. Retirement accounts ought to be shown as non-current assets.
The current portion of each postponed tax assets and postponed tax liabilities area unit to be
recorded as current assets or current liabilities.

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WORKING CAPITAL MANAGEMENT INVENTORY MANAGEMENT

Inventories area unit lists of stocks-raw materials, add progress or finished goods-waiting to
be consumed in production or to be sold-out.

The total balance of inventory is that the add of the worth of every individual stock line.
Stock records area unit needed:

• To offer Associate in Nursing account of activity at intervals every stock line;

• As proof to support the balances employed in monetary reports.

A department additionally wants a system of internal controls to with efficiency manage

stocks and to confirm that stock records offer reliable data.

Departmental monetary reports show solely the full inventory balance. Analysts from outside
the department will examine this balance by exploitation magnitude relation analysis or
alternative techniques. However, this provides solely a restricted assessment of inventory
management and isn't adequate for internal management. sensible monetary management
necessitates the careful analysis of individual inventory lines.

Inventory Management involves the management of assets being made for the needs of sale
within the traditional course of the company's operations. The goal of effective inventory
management is to attenuate the full prices - direct and indirect - that area unit related to
holding inventories. However, the importance of inventory management to the corporate
depends upon the extent of investment in inventory.

The task of inventory designing are often extremely complicated in producing environments.
At a similar time, it rests on elementary principles. The system used for inventory should tie
into the operations of the firm. Inventory designing and management should be attentive to
the requirements of the firm. The firm ought to style systems, as well as reports that permit it
to create correct business choices

Inventory management is a vital facet of assets management as a result of inventories

themselves don't earn any revenue. Holding either insufficient or an excessive amount of
inventory incurs prices.

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Costs of carrying an excessive amount of inventory are:

• Opportunity price of gone interest;

• Warehousing costs;

• Damage and pilferage;

• Obsolescence;

• Insurance.

Costs of carrying insufficient inventory are:

• Stock out costs:

- Lost sales;

- delayed service.

• Ordering costs:

- Freight;

- order administration;

- loss of amount discounts.

Making frequent little orders will minimize carrying prices however this will increase
ordering prices and therefore the risk of stock-outs. Risk of stock-outs are often reduced by
carrying "safety stocks" (at a cost) and re-ordering before time.

The best ordering strategy needs equalisation the varied price factors to confirm the
department incurs minimum inventory prices. The optimum inventory position is thought
because the Economic Reorder amount (ERQ). There area unit variety of mathematical
models (of variable complexity) for shrewd ERQ.

Analytical review of inventories will facilitate to spot areas wherever inventory management
are often improved. Slow moving things, continual stock outs, degeneration, stock

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reconciliation issues and excess spoilage area unit signals that stock lines would like nearer
analysis and management.

However, it's vital to stay Associate in Nursing overall perspective. it's not efficient to closely
manage an outsized variety of low price inventory lines, neither is it necessary. A usual
feature of inventories is that atiny low variety of high price lines account for an outsized
proportion of inventory price. The "80/20" rule (PARETO) predicts that eightieth of the full
price of inventory is painted by solely two hundredth of the quantity of inventory things.
Those high price lines would like fairly shut management. The remaining eightieth of
inventory lines are often managed exploitation "broad-brush" ways.

The overall management philosophy of a corporation will have an effect on the means during
which inventory is managed. for instance, "Just in Time" (JIT) production management
organizes production in order that finished product aren't made till the client wants them
(minimizing finished product carrying costs), and raw materials aren't accepted from
suppliers till they're required. (Large organizations have the facility to insist that suppliers
hold stocks of raw materials and thereby pass the opportunity cost back to the supplier).
Thus, JIT inventory ways scale back bottlenecks and stock holding prices.

In summary:

• There could be a trade-off to be created between carrying prices, ordering prices, and
stock out prices. this is often painted within the Economic Reorder amount (ERQ) model.

• Inventories ought to be managed on a line-by-line basis exploitation the 80/20 rule.

• Analytical review will facilitate to focus attention on important areas.

• Inventory management is an element of the general management strategy.

A system for effective inventory management involves 3 subsystems namely:

1. Economic order quantity(EOQ)

2. Reorder purpose

3. Stock level

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COST related to INVENTORIES

The effective management of inventory involves a trade off between having insufficient and
an excessive amount of inventory. In achieving this trade off, the Finance Manager ought to
understand that prices could also be closely connected. to look at inventory from the value
aspect, 5 classes of prices are often known of that 3 area unit direct prices that area unit
forthwith connected to purchasing and holding product and therefore the last 2 area unit
indirect prices that area unit losses of revenues that modify with differing inventory
management choices.

The 5 prices of holding inventories are:

1. Material prices of Inventory:

These area unit {the prices|the prices} of buying the products as well as transportation and
handling costs.

2. Ordering Costs:

Any producing organization should purchase materials. in this event, the ordering prices
consult with the prices related to the preparation of purchase requisition by the user
department, preparation of commercial document and follow-up measures taken by the
acquisition department, transportation of materials ordered for, review and handling at the
warehouse for storing. occasionally even demurrage charges for not lifting the products in
time area unit enclosed as a part of ordering prices. scan a lot of regarding ordering prices

3. Carrying Costs:

These area unit the expenses of storing product. Once the products are accepted, they become
a part of the firm's inventories. These prices embrace insurance, rent/depreciation of
warehouse, salaries of shopkeeper, his assistants and security personnel, finance price of cash
locked-up in inventories, degeneration, spoilage and taxes.

4. price of funds engaged with Inventory:

Whenever a firm commits its resources to inventory, it's exploitation funds that alternative
wise may well be obtainable for other functions. The firm has lost the utilization of funds for

18
alternative profit creating functions. this is often its cost. regardless of the supply of funds
inventory incorporates a price in terms of monetary resources. Excess inventory represents
Associate in Nursing surplus price.

It doesn't follow any explicit inventory management technique. It makes use of the weighted
average valuation technique to calculate the value of the inventory. they need varied classes
of inventories and that they maintain completely different reorder levels for various
merchandise. The monthly calculation of the inventory through weighted average technique
of the chemical merchandise of the corporate is shown within the annexure.

CASH MANAGEMENT

Good money management will have a significant impact on overall assets management.

The key parts of money management are:

• Cash forecasting;

• Balance management;

• Administration;

• Internal management.

Cash foretelling. sensible money management needs regular forecasts. so as for these to be
materially correct, they have to be supported data provided by those managers answerable for
the amounts and temporal arrangement of expenditure. cost and in operation expenditure
should be taken into consideration. it's additionally necessary to gather data regarding close at
hand money transactions from alternative monetary systems, like creditors and payroll.

Balance Management: Those answerable for balance management should create choices
regarding a lot of|what proportion|what quantity} money ought to at any time air decision
within the division checking account and the way much ought to air term deposit at the varied
terms obtainable.

There area unit varied kinds of mathematical model that may be used. One kind is analogous
to the ERQ inventory model. applied mathematics models are developed for money
management, subject to sure constraints. There are a lot of subtle techniques.

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Administration. money receipts ought to be processed and banked as quickly as doable
because:

• They cannot earn interest or scale back order of payment till they're banked;

• Information regarding the existence and amounts of money receipts is typically not
obtainable till they're processed.

Where doable, money floats (mainly monetary fund and advances) ought to be avoided. If, on
review, the sole reason that may be advocate for his or her existence is that "we've forever
had them", they ought to be out of print. There could also be things wherever they're helpful,
however. for instance, it's going to be fascinating for peripheral components of departments
to fulfill imperative native wants from money floats instead of native bank accounts.

Internal management. money and money management is an element of a department's overall

control system. the most internal money management is invariably the bank reconciliation.
This provides assurance that the money balances recorded within the accounting systems area
unit in line with the particular bank balances. It needs regular clearing of adaptive things.

The key to productive money management is milestones:

o Capital is provided to execute a business arrange

o Cash use should track growth in enterprise price

o Enterprise price is measured by milestones, not the commercial enterprise calendar

Cash management isn't price management

o Cost management could be a reactive live exploitation crude tools e.g. % cuts

o Cost management typically depletes price (e.g. by exploitation individuals as

accounting chips)

CREDITORS MANAGEMENT

Creditors area unit the companies or those that offer product and services in credit terms.
That is, they permit North American country time to pay instead of paying in money.

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There area unit sensible reasons why we tend to permit individuals to pay on credit although
virtually it does not create sense! If we tend to permit individuals time to pay their bills,
they're a lot of seemingly to shop for from your business than from another business that does
not provide credit. The length of credit amount allowed is additionally an element that may
facilitate a possible client deciding whether or not to shop for from an organization or not: the
longer the higher.

Creditors can ought to optimize their credit management policies in mere a similar means
because the debtors' turnover magnitude relation.

CREDITORS TURNOVER RATIO:

Creditors' Turnover = Average Creditors

(Cost of Sales/365)

As with the stock turnover magnitude relation, mortal values relate to the prices of raw
materials, product and services

DEBTORS MANAGEMENT

The objective of person management is to attenuate the time-lapse between completion of

sales and receipt of payment. the prices of getting debtors are:

• Opportunity prices (cash isn't obtainable for alternative purposes);

• Bad debts.

Debtor management includes each pre-sale and debt assortment ways.

Pre-sale ways include:

• Offering money discounts for early payment and/or imposing penalties for late
payment;

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• Agreeing payment terms in advance;

• Requiring money before delivery;

• Setting credit limits;

• Setting criteria for getting credit;

• Billing as early as possible;

• Requiring deposits and/or progress payments.

Post-sale ways include:

• Placing the responsibility for collection the debt upon the middle that created the sale;

• Identifying long delinquent balances and uncertain debts by regular analytical

reviews;

• Having a longtime procedure for late collections, such as

- a reminder;

- a letter;

- cancellation of additional credit;

- phonephone calls;

- use of a set agency;

- action at law.

Objectives of assets management:

• To maintain Associate in Nursing optimum level of investment in assets.

• To maintain optimum volume of sales.

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• To management the value of credit allowed it at the minimum doable level.

• To keep down the common assortment amount.

• To acquire take pleasure in the investment in debtors at optimum level.

Debt management and Debt assortment amount

Debt management is a vital a part of commercial activity as a result of though a debt is

Associate in Nursing quality, it's not as liquid Associate in Nursing quality as take advantage
the bank. companies got to guarantee they collect their debts as with efficiency as doable at
intervals the terms they need set for the debt.

The only means we are able to take into account however economical the firm's debt
management has been is to use a magnitude relation. This magnitude relation is thought
because the debt assortment amount.

DEBT assortment amount =

(in days) 365

debt turnover magnitude relation

The figure measures (in variety of days) however long on the average it's taken the firm to
gather its debts. the upper the figure the longer it's taken. However, the traditional amount for
collection debts can disagree between industries. for instance, a figure of twelve days could
sound terribly spectacular, however if this was the figure for a sequence of supermarkets it'd
be high. thus no debt is incurred and retail companies can tend to own only a few debtors and
an occasional debt assortment amount. companies United Nations agency do tons of business
on credit although can have abundant higher debt assortment periods.

Debtors' Turnover

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Debtors management could be a very important facet of assets management. several
businesses ought to sell their product on credit, otherwise they may realize it tough to survive
if their competitors offer such credit facilities; this might mean losing customers to the
opposition.

The formula for debtors' turnover is:

Debtors' Turnover = Net credit sales

Average debtors

Debtor’s management

Working Capital Cycle

The means assets moves round the business is sculptured by the assets cycle. This shows the
money coming back into the business, what happens thereto whereas the business has it so
wherever it goes.

The assets cycle shows the movement of money into and out of the business. The parts of
assets cycle area unit the debtors, creditors, raw materials and money.

The cycle starts with shopping for of raw materials on credit from the suppliers. These
suppliers become the creditors of the corporate. The raw materials endure through completely
different price addition stages and area unit born-again into finished product. The finished
product area unit sold-out to the shoppers on credit United Nations agency become the
debtors of the corporate. At the tip of the credit amount the corporate gets the money from the
debtors whom they pay to the creditors and therefore the cycle goes on.

It is should for any company to own a perfect assets cycle. It ought to neither be too long nor
too short. If the cycle is simply too long the funds grind to a halt up with the debtors and
prompt payment to the creditors can't be created.

a straightforward assets cycle could look one thing like:

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25
 Payment

CASH CREDITORS

Supply
Collection

RAW
DEBTORS
MATERIALS

Sales Production

FINISHED W.I.P
GOODS
Value added conversion

WORKING CAPITAL FINANCING

Banks ar the most institutional sources of capital finance in Republic of India. when
trade credit bank credit is that the most vital supply of capital demand of corporations
in Republic of India. A bank considers a firm’s sales and production plans and also the
fascinating levels of current assets in crucial its capital necessities. the number
approved by the bank for the firm’s capital is termed credit limit.

FORMS OF BANK FINANCE.

A firm will draw funds from its banks inside the utmost credit limit sanctioned. It will
draw funds within the following forms.

→ Overdrafts

26
→ Cash credit

→ Bills getting or discounting

→ Working capital loan

→ Letter of credit

TANDON COMMITTEE

Like several alternative activities of the banks, methodology and quantum of short-run
finance that may be granted to a company was mandated by the depository financial
institution of Republic of India until 1994. This management was exercised on the
lines steered by the recommendations of a study cluster headed by Shri Prakash
Tandon.

The study cluster headed by Shri Prakash Tandon, the then Chairman of Punjab
commercial bank, was planted by the tally in July 1974 with eminent personalities
drawn from leading banks, monetary establishments and a good crosswise of the trade
with a read to check the complete gamut of Bank's finance for capital and counsel
ways that for optimum utilization of Bank credit. This was the primary elaborate try by
the financial institution to arrange the Bank credit. The report of this cluster is wide
referred to as Tandon Committee report. Most banks in Republic of India even
nowadays still look into the wants of the corporates within the lightweight of
methodology counseled by the cluster.

As per the recommendations of Tandon Committee, the corporates ought to be

discouraged from accumulating an excessive amount of of stocks of current assets and
may move towards terribly lean inventories and due levels. The committee even
steered the utmost levels of stuff, Stock-in-process Associate in Nursingd Finished
merchandise that a company operative in an trade ought to be allowed to accumulate
these levels were termed as inventory and due norms. reckoning on the scale of credit
needed, the funding of those current assets (working capital needs) of the corporates
might be met by one in all the subsequent methods:

27
First Method of Lending:

Banks will total the capital gap, i.e. total current assets less current liabilities aside
from bank borrowings (called most Permissible Bank Finance or MPBF) and finance a
most of seventy five per cent of the gap; the balance to come back out of long-run
funds, i.e., owned funds and term borrowings. This approach was thought-about
appropriate just for terribly tiny borrowers i.e. wherever the necessities of credit were
but Rs.12 lacs. This methodology can provides a minimum current magnitude relation
of 1:1

Second methodology of Lending:

below this methodology, it had been thought that the receiver ought to give for a
minimum of twenty fifth of total current assets out of long-run funds i.e., owned funds
and term borrowings. a definite level of credit for purchases and different current
liabilities are offered to fund the build from current assets and also the bank can give
the balance (MPBF). Consequently, total current liabilities comprehensive of bank
borrowings couldn't exceed seventy fifth of current assets. run batted in stipulated that
the capital desires of all borrowers enjoying fund primarily based credit facilities of
over Rs. twelve lacs ought to be appraised (calculated) below this methodology this
methodology can provides a current magnitude relation of one.3:1.

Working Capital assessment on the formula prescribed by the Tandon Committee.

Working Capital demand (WCR) = [Current assets i.e. CA (as per business norms) –
Current Liabilities i.e. CL]

Permissible Bank funding [PBF} = WCR – Promoter’s Margin cash i.e. PMM (to be
brought in by the promoter)

As per Formula 1: PMM = twenty fifth of [CA – CL] and thereby PBF = seventy fifth
of [CA – CL]

As per Formula 2: PMM = twenty fifth of CA and thereby PBF = 75%[CA] – CL

As is obvious Formula a pair of needs a better level of PMM as compared to Formula

one. Formula a pair of is mostly adopted just in case of bank funding. In cases of sick

28
units wherever the promoter is unable to usher in PMM to the extent needed below
Formula a pair of, the distinction in PMM between Formulae one and a couple of
could also be provided as a capital Term Loan owed in installments over a amount of
your time.

METHODS FOR determinative PERMISSIBLE BANK BORROWINGS

1st method 2nd method

(a) Current 120 120

assets(CA)
(b) Current 20 20
liabilities(CL)
(c) Working capital 80 80
gap (CA-CL)(a-
b)
(d) Borrower’s 20(25% of c) 25(25% 0f a)
contribution
(e) Permissible bank 60 55
finance,(c-d)

The main factors employed in the estimation of assets requirement:

• The nature of business and sector-wise norms

• Factors like seasonality of raw materials or of demand could need a high level of
inventory being maintained by the corporate. Similarly, business norms of credit allowed to
consumers confirm the extent of debtors of the corporate within the traditional course of
business.

• The level of activity of the business

Inventories and assets square measure commonly expressed as a multiple of a day’s

production or sale. Hence, higher the extent of activity, higher the quantum of inventory,
assets and thereby assets demand of the business. thus so as to gain the assets demand of the
business for the year, it's essential to work out the extent of production that the business
would succeed. just in case of well-established businesses, the previous year’s actual and
therefore the management projections for the year give sensible indicators. the issues arise
chiefly within the case of determinant the limit for the primary time or within the initial few

29
years of the business. Banks typically adopt business customary norms for capability
utilization within the initial years.

Steps concerned in inbound at the extent of assets requirement:

• Based on the extent of activity set and therefore the cost and sales worth projections,
the banks calculate at the annual sales and value of production.

• The quantum of current assets (CA) within the sort of Raw Materials, Work-in-
progress, Finished merchandise and assets is calculable as a multiple of the common daily
turnover. The multiple for every of the present assets is set typically supported the business
norms.

• The current liabilities (CL) within the sort of credit availed by the business from its
creditors or on its producing expenses square measure subtracted from the present assets
(CA) to gain the assets demand (WCR).

• The issue of computation of assets demand has aroused considerable dialogue and a
spotlight during this country over the past few decades. A directed credit approach was
adopted by the banking company of guaranteeing the flow of credit to the priority sectors for
fulfillment of the expansion objectives set down by the planners. Consequently, the quantum
of bank credit needed for achieving the requisite growth in business was to be assessed.
varied committees like the Tandon Committee and therefore the job Committee were habitual
and studied the matter at length.

• Norms were fastened relating to the quantum of assorted current assets for various
industries (as multiples of the common daily output) and therefore the most Permissible Bank
funding (MPBF) was capped at an exact share of the assets demand so found out.

Negative assets

Some firms will generate money thus quickly they really have a negative assets. this is often
typically true of firms within the building business (McDonalds had a negative assets of
$698.5 million between 1999 and 2000). Amazon.com is another example. This happens as
a result of customers pay direct then quickly, the business has no issues raising money. In
these firms, product square measure delivered and sold to the client before the corporate ever
pays for them.

30
A negative assets may be a sign of social control potency during a exceedingly|in a very}
business with low inventory and assets (which means that they treat an nearly strictly money
basis). In the other scenario, it's a symptom an organization could also be facing bankruptcy
or serious monetary bother

Ratio Analysis:

The quantitative relation analysis is one amongst the foremost powerful tools of monetary
analysis. it's the method of creating and decoding varied ratios (Quantities relationship
between figures and teams of figures).it is with the assistance of ratios that the monetary
statements are often analysis a lot of clearly and call square measure made up of such
analyses.

A quantitative relation is easy arithmetic expression of the connection of 1 to a different. in

keeping with accountants Handbooks by Ixen Associate in Nursingd Bedford a quantitative
relation is an expression of the quantities relationship between 2 numbers.

Types of Ratios:

i. Liquidity Ratios

ii. Leverage quantitative relations

iii. profit Ratios

iv. Activity Ratios

i. Liquidity quantitative relation

Measures companies ability to satisfy its obligation; leverage ratios show the proportions of
the debt equity in funding the firm’s assets; activity ratios replicate the firm potency in
utilizing its assets, and profit ratios live overall performance and effectiveness of the firm.

31
ii. Leverage Ratio

The short creditors, like bankers and suppliers of raw materials, square measure a lot of
involved with the forms current debt paying ability. On the opposite hand, long run creditors
like debenture holder’s institution etc. square measure a lot of involved with the firm’s long
run monetary strength. A firm ought to have robust short yet as long monetary position.

iii. profit quantitative relation

Profitability refers to internet results of business operation 2 kinds of ratios {are|ar|area

unit|square live} wont to measure profit. These square measure gross margin ratios rate of
come back ratios. whereas gross margin ratios shows the connection between profit and
investment.

The necessary gross margin ratios are:

Gross profit quantitative relation,

Operating profit quantitative relation,

Net profit quantitative relation.

The necessary rate of come back ratios are:

Return on assets come back of capital used,

Return on shareholders’ equity,

Return on equity share capital.

Activity quantitative relation

These ratios also are noted activity ratios plus management ratios. They live however potency
a firm employs the assets. they're supported the connection between level of activity and
levels of assorted assets. The necessary turnover quantitative relations square measure
inventory turnover ratio, debtors’ turnover quantitative relation, creditors’ turnover
quantitative relation, fastened turnover quantitative relation, total assets turnover quantitative
relation.

32
Comparative record

The comparative record analysis is that the study of the trend of identical things, cluster {of
things|of things} and computed items in 2 or a lot of balance sheets of identical enterprise on
totally different dates. The changes in amountic determined by comparison of the record at
the top of a period Associate in Nursingd these changes will facilitate in informing an opinion
regarding the progress of and enterprise.

While decoding comparative record the interpreter is predicted to check the subsequent
aspects;-

1. Current decoding comparative and liquidity position

2. long run monetary position

3. profit of the priority

33
 CHAPTER-III

INDUSTRY PROFILE

&

COMPANY PROFILE
34
A bank could be a financial organization that accepts deposits and channels those deposits into
loaning activities. Banks primarily offer monetary services to customers whereas enriching investors.
Government restrictions on monetary activities by banks vary over time and site. Banks area unit
necessary players in monetary markets and provide services like investment and loans. In some
countries like European country, banks have traditionally in hand major stakes in industrial
companies whereas in alternative countries like the u. s. banks area unit prohibited from owning non-
financial corporations. In Japan, banks area unit sometimes the nexus of a cross-share holding entity
called the keiretsu. In France, bancassurance is current, as most banks provide insurance services
(and currently realty services) to their shoppers.
Introduction

India’s banking sector is continually growing. Since the flip of the century, there has been a visible
upsurge in transactions through ATMs, and conjointly web and mobile banking.
Following the passing of the Banking Laws (Amendment) Bill by the Indian Parliament in 2014, the
landscape of the banking system began to alter. The bill permits the depository financial institution
of Asian nation (RBI) to create final tips on issuance new licenses, that may lead to a much bigger
range of banks within the country. Some banks have already received licences from the govt, and
also the RBI's new norms can offer incentives to banks to identify unhealthy loans and take requisite
action to stay scallywag borrowers under control.
Over subsequent decade, the banking sector is projected to form up to 2 million new jobs, driven by
the efforts of the tally and also the Government of Asian nation to integrate monetary services into
rural areas. Also, the normal means of operations can slowly crumple to fashionable technology.

Market size

35
Total banking assets in Asian nation touched US$ one.8 trillion in FY13 and area unit anticipated to
cross US$ twenty eight.5 trillion in FY25.
Bank deposits have big at a compound annual rate of growth (CAGR) of twenty one.2 per cent over
FY06–13. Total deposits in FY13 were US$ one,274.3 billion.
Total banking sector credit is anticipated to grow at a CAGR of eighteen.1 per cent (in terms of INR)
to achieve US$ a pair of.4 trillion by 2017.
In FY14, personal sector lenders witnessed discernible growth in credit cards and private loan
businesses. KOTAK MAHINDRA Bank witnessed 141.6 per cent growth in loan disbursement in
FY14, as per a report by Emkay international monetary Services. Axis Bank's loan business
conjointly rose forty nine.8 per cent and its mastercard business swollen by thirty one.1 per cent.

Investments

Bengaluru-based software package services businessperson Mphasis Ltd has bagged a five-year
contract from Punjab commercial bank (PNB) to line up the bank’s contact centres in Mangalore and
Noida (UP). Mphasis can offer support for all banking merchandise and services, as well as deposits
operations, loaning services, banking processes, web banking, and account and card-related services.
the corporate will provide services in multiple languages.
Microfinance corporations have committed to putting in a minimum of thirty million bank accounts
inside a year through tie-ups with banks, as a part of the Indian government’s monetary inclusion
arrange. The commitment was created at a gathering of representatives of twenty five giant
microfinance corporations and banks and government representatives, including monetary services
secretary adult male GS Sandhu.
Export-Import Bank of {india|India|Republic of Asian nation|Bharat|Asian country|Asian nation}
(Exim Bank) can increase its specialize in supporting project exports from India to South Asia,
continent and Latin America, as per adult male Yaduvendra Mathur, Chairman and MD, Exim Bank.
The bank has stirred up the worth chain by supporting project exports so Asian nation earns
exchange. In 2014–13, Exim Bank season support to eighty five project export contracts value Rs
twenty four,255 large integer (US$ three.96 billion) secured by forty seven corporations in twenty
three countries.

Government Initiatives

36
The tally has given banks bigger flexibility to finance current long-gestation project loans value Rs
one,000 large integer (US$ 163.42 million) and additional, and has allowed partial acquisition of
such loans by alternative monetary establishments as commonplace follow. the sooner stipulation
was that patrons can buy a minimum of fifty per cent of the loan from the present banks. Now, they
get as low as twenty five per cent of the loan price and also the loan can still be treated as ‘standard’.
The tally has conjointly relaxed norms for mortgage guarantee corporations (MGC) enabling these
companies to use contingency reserves to hide for the losses suffered by the mortgage guarantee
holders, while not the approval of the apex bank. However, such a live will solely be initiated if
there's no single choice left to recoup the losses.
SBI is reaching to launch a contact-less or tap-and-go card facility to create payments in Asian
nation. Contact-less payment could be a technology that has been adopted in many countries, as well
as Australia, North American country and also the kingdom, wherever customers will merely faucet
or wave their card over a reader at a location terminal, that reads the cardboard and permits
transactions.
SBI and its 5 associate banks conjointly attempt to empower account holders at all-time low of the
social pyramid with a client decision facility. The planned facility can facilitate customers get AN
update on obtainable balance, last 5 transactions and cheque book request on their mobile phones.

Road Ahead
India is nevertheless to faucet into the potential of mobile banking and digital monetary services.
xlvii per cent of the people have bank accounts, of that 0.5 lie dormant because of reliance on money
transactions, as per a report. Still, the business holds loads of promise.
India's banking sector may become the fifth largest banking sector within the world by 2020 and also
the third largest by 2025. These days, Indian banks area unit turning their focus to union shoppers
and enhancing their technology infrastructure, which might facilitate improve client expertise
likewise as provide banks a competitive edge.
Exchange Rate Used: government agency one = US$ zero.0163 as on Oct twenty eight, 2016
The level of state regulation of the banking system varies wide, with countries like Iceland, having
comparatively lightweight regulation of the banking sector, and countries like China having a large
form of rules however no systematic method that may be followed typical of a communist system.
The oldest bank still existing is three-card monte dei Paschi di Siena, headquartered in Siena, Italy,
that has been operative ceaselessly since 1472.
History
Origin of the word

37
The name bank derives from the Italian word banco "desk/bench", used throughout the Renaissance
by someone city bankers, World Health Organization wont to build their transactions higher than a
table coated by a inexperienced table linen. However, there area unit traces of banking activity even
in precedent days, that indicates that the word 'bank' may not essentially return from the word
'banco'.
In fact, the word traces its origins back to the traditional Roman Empire, wherever moneylenders
would got wind of their stalls within the middle of engulfed courtyards referred to as macella on an
extended bench referred to as a bancu, from that the words banco and bank area unit derived. As a
moneychanger, the merchandiser at the bancu failed to most invest cash as simply convert the
foreign currency into the sole medium of exchange in Rome—that of the Imperial Mint.
The earliest proof of money-changing activity is delineated on a silver drachm coin from ancient
Hellenic colony Trapezus on the Black Sea, fashionable Trabzon, c. 350–325 BC, bestowed within
the British repository in London. The coin shows a banker's table (trapeza) laden with coins, a pun
on the name of the town.
In fact, even nowadays in Modern Greek the word Trapeza (Τράπεζα) means that each a table and a
bank.
Traditional banking activities
Banks act as payment agents by conducting checking or current accounts for patrons, paying cheques
drawn by customers on the bank, and grouping cheques deposited to customers' current accounts.
Banks conjointly alter client payments via alternative payment ways like telegraphic transfer,
EFTPOS, and ATM.
Banks borrow cash by acceptive funds deposited on current accounts, by acceptive term deposits,
and by issuance debt securities like banknotes and bonds. Banks lend cash by creating advances to
customers on current accounts, by creating installment loans, and by investment in marketable debt
securities and alternative sorts of cash loaning.
Banks offer the majority payment services, and a checking account is taken into account
indispensable by most businesses, people and governments. Non-banks that offer payment services
like remittal corporations aren't commonly thought of AN adequate substitute for having a checking
account.
Banks borrow most funds from households and non-financial businesses, and lend most funds to
households and non-financial businesses, however non-bank lenders offer a major and in several
cases adequate substitute for bank loans, and securities industry funds, money management trusts
ANd alternative non-bank monetary establishments in several cases offer an adequate substitute to
banks for loaning savings to.

38
Entry regulation
Currently in most jurisdictions business banks area unit regulated by government entities and need a
special bank licence to work.
Usually the definition of the business of banking for the needs of regulation is extended to
incorporate acceptance of deposits, although they're not owed to the customer's order—although cash
loaning, by itself, is mostly not enclosed within the definition.
Unlike most alternative regulated industries, the regulator is often conjointly a participant within the
market, i.e. a government-owned (central) bank. Central banks conjointly usually have a monopoly
on the business of issuance banknotes. However, in some countries this is often not the case. In the
UK, as an example, the monetary Services Authority licences banks, and a few business banks (such
because the Bank of Scotland) issue their own banknotes additionally to those issued by the Bank of
England, the united kingdom government's financial organisation.
Accounting for bank accounts
Bank statements area unit accounting records created by banks beneath the assorted accounting
standards of the globe. beneath generally accepted accounting practices and IFRS there area unit 2
varieties of accounts: debit and credit. Credit accounts area unit Revenue, Equity and Liabilities.
Debit Accounts area unit Assets and Expenses. this suggests you credit a revolving credit to extend
its balance, and you debit a debit account to decrease its balance.
This conjointly means that you debit your bank account each time you deposit cash into it (and the
account is generally in deficit), whereas you credit your mastercard account each time you pay cash
from it (and the account is generally in credit).
However, if you scan your financial statement, it'll say the opposite—that you credit your account
once you deposit cash, and you debit it once you withdraw funds. If you have got make the most
your account, you have got a positive (or credit) balance; if you're overdrawn, you have got a
negative (or deficit) balance.
The reason for this is often that the bank, and not you, has created the financial statement. Your
savings may be your assets, however the bank's liability, in order that they area unit credit accounts
(which ought to have a positive balance). Conversely, your loans area unit your liabilities however
the bank's assets, in order that they area unit debit accounts (which ought to even have a positive
balance).
Where bank transactions, balances, credits and debits area unit mentioned below, {they area
unit|they're} done therefore from the point of view of the account holder—which is historically what
most of the people are wont to seeing.
Economic functions

39
1. issue of cash, within the kind of banknotes and current accounts subject to cheque or payment
at the customer's order. These claims on banks will act as cash as a result of they're negotiable and/or
owed on demand, and thence valued at par. they're effectively transferable by mere delivery, within
the case of banknotes, or by drawing a cheque that the receiver could bank or money.
2. netting and settlement of payments – banks act as each assortment and paying agents for
patrons, collaborating in interbank clearing and settlement systems to gather, present, be bestowed
with, and pay payment instruments. this permits banks to economise on reserves control for
settlement of payments, since inward and outward payments offset one another. It conjointly allows
the countervailing of payment flows between geographical areas, reducing the price of settlement
between them.
3. credit intercession – banks borrow and lend consecutive on their own account as middle men.
4. credit quality improvement – banks lend cash to normal business and private borrowers
(ordinary credit quality), however area unit top quality borrowers. the development comes from
diversification of the bank's assets and capital that provides a buffer to soak up losses while not
defaulting on its obligations. However, banknotes and deposits area unit typically unsecured; if the
bank gets into issue and pledges assets as security, to boost the funding it has to still operate, this
puts the note holders ANd depositors in an economically subordinated position.
5. maturity transformation – banks borrow additional on demand debt and short term debt,
however offer additional long run loans. In alternative words, they borrow short and lend long. With
a stronger credit quality than most alternative borrowers, banks will do that by aggregating problems
(e.g. acceptive deposits and issuance banknotes) and redemptions (e.g. withdrawals and redemptions
of banknotes), maintaining reserves of money, investment in marketable securities that may be
pronto reborn to money if required, and raising replacement funding as required from numerous
sources (e.g. wholesale money markets and securities markets).
Law of banking
Banking law is predicated on a written agreement ANalysis of the link between the bank (defined
above) and also the customer—defined as any entity that the bank agrees to conduct an account.
The law implies rights and obligations into this relationship as follows:
1. The checking account balance is that the monetary position between the bank and also the
customer: once the account is in credit, the bank owes the balance to the customer; once the account
is overdrawn, the client owes the balance to the bank.
2. The bank agrees to pay the customer's cheques up to the number standing to the credit of the
customer's account, and any united order of payment limit.

40
3. The bank might not pay from the client's account while not a mandate from the customer, e.g.
a cheque drawn by the client.
4. The bank agrees to promptly collect the cheques deposited to the customer's account because
the customer's agent, and to credit the take to the customer's account.
5. The bank contains a right to mix the customer's accounts, since every account is simply a
facet of a similar credit relationship.
6. The bank contains a lien on cheques deposited to the customer's account, to the extent that the
client is indebted to the bank.
7. The bank should not disclose details of transactions through the client's account—unless the
customer consents, there's a public duty to disclose, the bank's interests need it, or the law demands
it.
8. The bank should not shut a customer's account while not affordable notice, since cheques
area unit outstanding within the normal course of business for many days.
These understood written agreement terms could also be changed by specific agreement between the
client and also the bank. The statutes and rules effective inside a specific jurisdiction may modify the
higher than terms and/or produce new rights, obligations or limitations relevant to the bank-customer
relationship.
Some styles of financial organization, like building societies and credit unions, could also be
partially or totally exempt from bank licence necessities, and so regulated beneath separate rules.
The requirements for the difficulty of a bank licence vary between jurisdictions however usually
include:
1. Minimum capital
2. Minimum capital quantitative relation
3. 'Fit and Proper' necessities for the bank's controllers, owners, directors, and/or senior officers
4. Approval of the bank's business arrange as being sufficiently prudent and plausible.
Types of banks
Banks' activities may be divided into retail banking, dealing directly with people and little
businesses; business banking, providing services to mid-market business; company banking, directed
at giant business entities; personal banking, providing wealth management services to high internet
value people and families; and investment banking, about activities on the monetary markets. Most
banks area unit profit-making, personal enterprises. However, some area unit in hand by government,
or area unit non-profit organizations.

41
Central banks area unit commonly government-owned and charged with quasi-regulatory
responsibilities, like supervision business banks, or dominant the money rate. they typically offer
liquidity to the banking industry and act because the loaner of expedient in event of a crisis.
Types of retail banks
• Commercial bank: the term used for a standard bank to tell apart it from AN investment bank.
once the good Depression, the U.S. Congress needed that banks solely interact in banking activities,
whereas investment banks were restricted to capital market activities. Since the 2 not got to be
beneath separate possession, some use the term "commercial bank" to check with a bank or a
division of a bank that principally deals with deposits and loans from companies or giant businesses.
• Community Banks: regionally operated monetary establishments that empower staff to create
native choices to serve their customers and also the partners.
• Community development banks: regulated banks that offer monetary services and credit to
under-served markets or populations.
• Postal savings banks: savings banks related to national communication systems.
• Private banks: banks that manage the assets of high internet value people.
• Offshore banks: banks situated in jurisdictions with low taxation and regulation. several
offshore banks area unit basically personal banks.
• Savings bank: in Europe, savings banks take their roots within the nineteenth or generally
even eighteenth century. Their original objective was to supply simply accessible savings
merchandise to all or any strata of the population. In some countries, savings banks were created on
public initiative; in others, socially committed people created foundations to place in situ the
required infrastructure. Nowadays, European savings banks have unbroken their specialize in retail
banking: payments, savings merchandise, credits and insurances for people or tiny and medium-sized
enterprises. excluding this retail focus, they conjointly dissent from business banks by their broadly
speaking localized distribution network, providing native and regional outreach—and by their
socially accountable approach to business and society.
• Building societies and Landesbanks: establishments that conduct retail banking.
• Ethical banks: banks that range the transparency of all operations and build solely what they
concede to be socially-responsible investments.
• monotheism banks: Banks that interact consistent with Islamic principles.
Types of investment banks
• Investment banks "underwrite" (guarantee the sale of) stock and bond problems, trade for his
or her own accounts, build markets, and advise companies on capital market activities like mergers
and acquisitions.

42
• Merchant banks were historically banks that engaged in trade finance. the trendy definition,
however, refers to banks which offer capital to companies within the kind of shares instead of loans.
in contrast to capital companies, they have an inclination to not invest in new corporations.
Both combined
• Universal banks, additional normally called monetary services corporations, interact in many
of those activities. These massive banks area unit terribly distributed teams that, among alternative
services, conjointly distribute insurance— thence the term bancassurance, a neologism combining
"banque or bank" and "assurance", signifying that each banking and insurance area unit provided by
a similar company entity.
Other styles of banks
• Islamic banks adhere to the ideas of sharia. this manner of banking revolves around many
well-established principles supported monotheism canons. All banking activities should avoid
interest, a thought that's proscribed in Islam. Instead, the bank earns profit (markup) and charges on
the finance facilities that it extends to customers.

43
 COMPANY PROFILE
Kotak Mahindra Bank is the fourth largest Indian private sector bank by market
capitalization, headquartered in Mumbai, Maharashtra.

Since the inception of the erstwhile Kotak Mahindra Finance Limited in 1985, it has been a
steady and confident journey leading to growth and success. The milestones of the group
growth story are listed below year wise.

2012-2016  Ahmedabad Derivatives and Commodities Exchange, a Kotak

anchored enterprise, became operational as a national commodity
exchange.

 Kotak Mahindra Bank Ltd. opened a representative office in Dubai

2009
 Entered Ahmedabad Commodity Exchange as anchor investor.

2008  Launched a Pension Fund under the New Pension System.

 Bought the 25% stake held by Goldman Sachs in Kotak Mahindra Capital
2006
Company and Kotak Securities.

2005  Kotak Group realigned joint venture in Ford Credit; their stake in Kotak

44
 Mahindra Prime was bought out (formerly known as Kotak Mahindra Primus
Ltd) and Kotak group’s stake in Ford credit Kotak Mahindra was sold.
 Launched a real estate fund.

 Launched India Growth Fund, a private equity fund.

2004

 Kotak Mahindra Finance Ltd. converted into a commercial bank - the first
2003
Indian company to do so.

 Matrix sold to Friday Corporation.

2001
 Launched Insurance Services.
 Kotak Securities Ltd. was incorporated

 Kotak Mahindra tied up with Old Mutual plc. for the Life Insurance
2000
business.
 Kotak Securities launched its on-line broking site.
 Commencement of private equity activity through setting up of Kotak
Mahindra Venture Capital Fund.

 Entered the mutual fund market with the launch of Kotak Mahindra Asset
Management Company.
1998

 The Auto Finance Business is hived off into a separate company - Kotak
1996
Mahindra Prime Limited (formerly known as Kotak Mahindra Primus
Limited). Kotak Mahindra takes a significant stake in Ford Credit Kotak
 Mahindra Limited, for financing Ford vehicles. The launch of Matrix
Information Services Limited marks the Group's entry into information
distribution.

45
  Brokerage and Distribution businesses incorporated into a separate company
1995
- Securities. Investment banking division incorporated into a separate
company - Kotak Mahindra Capital Company

 Entered the Funds Syndication sector

1992

 The Investment Banking Division was started. Took over FICOM, one of
1991
India's largest financial retail marketing networks

 The Auto Finance division was started

1990

 Kotak Mahindra Finance Ltd entered the Lease and Hire Purchase market
1987

1986  Kotak Mahindra Finance Ltd started the activity of Bill Discounting

Our Businesses

Multiple businesses. One brand.

Kotak Mahindra is one of India's leading banking and financial services groups, offering a
wide range of financial services that encompass every sphere of life.

Kotak Mahindra Bank Ltd

 Kotak Mahindra Bank Ltd is a one stop shop for all banking needs.
The bank offers personal finance solutions of every kind from savings accounts to
credit cards, distribution of mutual funds to life insurance products. Kotak Mahindra
Bank offers transaction banking, operates lending verticals, manages IPOs and

46
 provides working capital loans. Kotak has one of the largest and most respected
Wealth Management teams in India, providing the widest range of solutions to high
net worth individuals, entrepreneurs, business families and employed professionals.

For more information, please visit the Kotak Mahindra Bank website
www.kotak.com/bank/personal-banking/

Kotak Mahindra Old Mutual Life Insurance Ltd

 Kotak Mahindra Old Mutual Life Insurance Ltd is a 74:26 joint

venture between Kotak Mahindra Bank Ltd., its affiliates and Old Mutual plc. A
Company that combines its international strengths and local advantages to offer its
customers a wide range of innovative life insurance products, helping them take
important financial decisions at every stage in life and stay financially independent.
The company covers over 3 million lives and is one of the fastest growing insurance
companies in India. www.kotaklifeinsurance.com

Kotak Securities Ltd

 Kotak Securities is one of the largest broking houses in India with a

wide geographical reach. Kotak Securities operations include stock broking and
distribution of various financial products including private and secondary placement
of debt, equity and mutual funds.

Kotak Securities operate in five main areas of business:

o Stock Broking (retail and institutional)

o Depository Services
o Portfolio Management Services
o Distribution of Mutual Funds
o Distribution of Kotak Mahindra Old Mutual Life Insurance Ltd products

47
 For more information, please visit the Kotak Securities website
www.kotaksecurities.com

Kotak Mahindra Capital Company (KMCC)

 Kotak Investment Banking (KMCC) is a full-service investment

bank in India offering a wide suite of capital market and advisory solutions to leading
domestic and multinational corporations, banks, financial institutions and government
companies.

Our services encompass Equity & Debt Capital Markets, M&A Advisory, Private
Equity Advisory, Restructuring and Recapitalization services, Structured Finance
services and Infrastructure Advisory & Fund Mobilization.

For more information, please visit the Kotak Investment Banking website
www.kmcc.co.in

Kotak Mahindra Prime Ltd (KMPL)

 Kotak Mahindra Prime Ltd is among India's largest dedicated

passenger vehicle finance companies. KMPL offers loans for the entire range of
passenger cars, multi-utility vehicles and pre-owned cars. Also on offer are inventory
funding and infrastructure funding to car dealers with strategic arrangements via
various car manufacturers in India as their preferred financier.

For more information, please visit the KMPL website http://carloan.kotak.com

Kotak International Business

48
  Kotak International Business specialises in providing a range of
services to overseas customers seeking to invest in India. For institutions and high net
worth individuals outside India, Kotak International Business offers asset
management through a range of offshore funds with specific advisory and
discretionary investment management services.

For more information, please visit the Kotak Mahindra International Business website
www.investindia.kotak.com

Kotak Mahindra Asset Management Company Ltd (KMAMC)

 Kotak Mahindra Asset Management Company offers a complete

bouquet of asset management products and services that are designed to suit the
diverse risk return profiles of each and every type of investor. KMAMC and Kotak
Mahindra Bank are the sponsors of Kotak Mahindra Pension Fund Ltd, which has
been appointed as one of six fund managers to manage pension funds under the New
Pension Scheme (NPS).

For more information, please visit the KMAMC website

www.kotakmutual.com/kmw/main.htm

Kotak Private Equity Group (KPEG)

 Kotak Private Equity Group helps nurture emerging businesses and

mid-size enterprises to evolve into tomorrow's industry leaders. With a proven track
record of helping build companies, KPEG also offers expertise with a combination of
equity capital, strategic support and value added services. What differentiates KPEG
is not merely funding companies, but also having a close involvement in their growth
as board members, advisors, strategists and fund-raisers.

For more information, please visit the KPEG website

www.privateequityfund.kotak.com

49
Kotak Realty Fund

 Kotak Realty Fund deals with equity investments covering sectors

such as hotels, IT parks, residential townships, shopping centres, industrial real estate,
health care, retail, education and property management. The investment focus here is
on development projects and enterprise level investments, both in real estate intensive
businesses.

For more information, please visit the Kotak Realty Fund website
www.realtyfund.kotak.com

Senior Management-2016-15

Mr. Uday S. Kotak

Executive Vice Chairman and Managing Director

Mr. Uday Kotak, is that the government Vice-Chairman and director of the Bank, and its
principal founder and promoter. Mr. Kotak is associate degree scholarly person of Jamnalal
Bajaj Institute of Management Studies.
In 1985, once he was still in his early twenties, adult male Kotak thought of putting in place a
bank once personal Indian banks weren't even seen within the game. initial Kotak Capital
Management Finance Ltd (which later became Kotak Mahindra Finance Ltd), and so with
Kotak Mahindra Finance Ltd, Kotak became the primary non-banking nondepository
financial institution in India's company history to be born-again into a bank. Over the years,
Kotak Mahindra cluster grew into many areas like stock broking and investment banking to
automotive finance, life assurance and mutual funds.
Among the numerous awards to adult male Kotak's credit ar the CNBC TV18 conceiver of
the Year Award in 2006 and therefore the painter & Young enterpriser of the Year Award in
2003. He was featured mutually of the worldwide Leaders for Tomorrow at the globe
Economic Forum's annual meet at Davos in 1996. He was conjointly featured among the
highest money Leaders for the twenty first Century by Euromoney magazine. He was named
as CNBC TV18 Bharat magnate of the Year 2008 and because the most valued corporate
executive by businessworld in 2012.

50
Mr. C Jayaram
Joint director
Mr. C. Jayaram, could be a Joint director of the Bank and is presently to blame of the Wealth
Management Business of the Kotak cluster. associate degree scholarly person of IIM urban
center, he has been with the Kotak cluster since 1990 and member of the Kotak board in
Gregorian calendar month 1999. He conjointly oversees the international subsidiaries and
therefore the alternate quality management business of the cluster. he's the Director of the
money coming up with Standards Board, India. He has varied expertise of over twenty five
years in several areas of finance and business, has designed varied businesses for the cluster
and was corporate executive of Kotak Securities Ltd. a zealous player and follower of court
game, he conjointly includes a keen interest in sociology.
Mr. Dipak Gupta
Joint director
An physical science engineer associate degreed an scholarly person of IIM Ahmedabad, Mr.
Gupta has been with the Kotak cluster since 1992 and joined the board in Gregorian calendar
month 1999.
He heads industrial banking, retail quality businesses and appears once cluster time unit
perform. Early on, he headed the finance perform and was instrumental within the venture
between Kotak Mahindra and Ford Credit International. He was the primary corporate
executive of the ensuing entity, Kotak Mahindra Primus Ltd.
Awards
Recent achievements
At Kotak Mahindra cluster we have a tendency to take a client-centric read and perpetually
pioneer to produce you with the simplest of services and infrastructure. we've frequently
received accolades that stand testimony to our success during this endeavour. a number of our
recent achievements are:

• Won ‘Gold Award for Best Innovation – World’s initial socially hopped-up bank
account’ and ‘Gold Award for Best App developed – World’s initial banking application
exploitation Twitter’ awards at the Indian Digital Media Awards 2016 for Kotak Jifi
• Recognised as Highest Fundraising Company in company Challenge class in
customary leased metropolis Marathon 2016
• Kotak Mahindra Bank was graded 292nd among India's most trusty brands in line
with the complete Trust Report 2014, a study conducted by Trust analysis consultative.

51
within the complete Trust Report 2015, Kotak Mahindra Bank was graded 861st among
India's most trusty brands and afterwards, in line with the complete Trust Report 2016, Kotak
Mahindra Bank was graded 114th among India's most trusty brands.
• Adjudged Best Bank among rising Banks at Outlook cash Awards 2015
Banking
• Euromoney
Best personal Banking Services (India), 2016.
• ICAI Award
Excellence in money news underneath class one - Banking Sector for the year ending thirty
first March, 2014
• Asiamoney
Best native money Management Bank 2014
• IDG Bharat
Kotak won the federation a hundred 'The Agile 100' award 2013
• IDRBT
Banking Technology Excellence Awards Best Bank Award in IT Framework and
Governance Among different Banks' - 2012
Banking Technology Award for IT Governance and price Delivery, 2008
• IR world Rankings
Best company Governance Practices - graded among the highest five firms in Asia Pacific,
2009
• FinanceAsia
Best personal Bank in Bharat, for Wealth Management business, 2009
• Kotak Royal Signature mastercard
Was chosen "Product of the Year" during a survey conducted by Nielsen in 2009
• IBA Banking Technology Awards
Best client Relationship accomplishment - Winner 2008 & 2009
Best overall winner, 2007
Best IT Team of the Year, four years during a row from 2006 to 2009
Best IT Security Policies & Practices, 2007
• Euromoney
Best personal Banking Services (overall), 2009
• Emerson period of time Champion Awards
Technology Senate writer period of time Championship Award within the BFSI class, 2008

52
Miscellaneous
• Best native Trade Bank in Bharat
The UK based mostly Trade & Forfaiting Review awarded Kotak Mahindra Bank Ltd. the
Bronze Award within the class of Best native Trade Bank in Bharat at the TFR Awards 2013.
• LACP Vision Awards 2012 for Annual Report 2012-11
Platinum Award - Best among Banking class, APAC
Gold Award - Most inventive Report, APAC
Ranked No. twenty one among high fifty Reports, APAC
Ranked No. eighty seven among the World's high a hundred Annual Reports
• Businessworld
'Most Valuable CEO' overall, 2012 awarded to adult male. Uday Kotak, government
chairman • CNBCTV eighteen
'Best performing arts chief financial officer within the Banking/Financial Services sector by
CNBCTV eighteen chief financial officer Awards 2012 awarded to adult male. Jaimin Bhatt
• GIREM
GIREM awarded Kotak real property Funds cluster, the "Investor of the Year" Award for
2009
• IBA Banking Technology Awards
Best Use of Business Intelligence - up, 2008
Best Enterprise Risk Management - Runner up, 2008
• The nice Places to figure Institute, India
Best Workplaces in Bharat, 2008
• Hewitt
10th Best leader in Bharat, 2007, 2008 & 2009
• Financial Insights Innovation Award
Best Innovation in Enterprise Security Management within the Asia Pacific Region, 2009
• Frost & Sullivan
Best rider Vehicle nondepository financial institution in Bharat, 2006
• CNBC TV eighteen
Indian magnate of the Year, 2008 awarded to Uday Kotak, government chairman Banking
info
The Bank publishes the standalone and consolidated results on a quarterly basis. The
standalone results is subjected to "Limited Review" by the auditors of the Bank. identical also
are reviewed by the Audit Committee before submission to the Board. at the side of the

53
quarterly results, associate degree earnings update is additionally ready and denote on the
web site of the Bank. quarterly, the chief Vice-Chairman and director and therefore the
government Director(s) participate on a decision with the analysts / shareholders, the
transcripts of that ar denote on the web site of the Bank. The Bank conjointly has dedicated
personnel to reply to queries from investors.
Financial Calendar:For every calendar quarter, the money results ar reviewed and brought on
record by the Board throughout the last week of the month beyond the quarter ending. The
audited annual accounts as at thirty first March ar approved by the Board, once a review
therefrom by the Audit Committee. The Annual General Meeting to contemplate such annual
accounts is control within the second quarter of the yr.
Stock Exchanges on that listed:
Sr.No Name & Address of Stock Exchange Market certificate Code
1 The city exchange restricted
Phiroze Jeejeebhoy Towers
Dalal Street, Fort,
Mumbai four hundred 023 500247
2 National exchange of Bharat restricted
Exchange Plaza, 5th Floor,
Bandra-Kurla complicated,
Bandra, metropolis four hundred 051 KOTAKBANK
3 Luxembourg exchange BP a hundred sixty five, L-2013 Luxembourg
commerce of shares to be in mandatorily dematerialized form:The equity shares of the Bank
are activated for dematerialisation with the National Securities repository restricted and with
the Central repository Services (India) restricted vide ISIN INE237A01028.
Share Transfer System: Applications for transfers, transmission and transposition ar received
by the Bank at its Registered workplace or at the office(s) of its Registrars & Share Transfer
Agents. because the shares of the Bank ar in dematerialised kind, the transfers ar punctually
processed by NSDL/CDSL in electronic kind through the various repository participants.
Shares that ar in physical kind ar processed by the Registrars & Share Transfer Agents, Karvy
Computershare personal restricted, on an everyday basis and therefore the certificates
despatched on to the investors.
Investor Helpdesk:Share transfers, dividend payments and every one different capitalist
connected activities ar attended to and processed at the workplace of our Registrars & Share
Transfer Agents. For lodgement of Transfer Deeds and the other documents or for any

54
grievances/complaints, kindly contact Karvy Computershare personal restricted, contact
details of that ar provided elsewhere within the Report.
For the convenience of the investors, transfers and complaints from the investors ar accepted
at the Registered workplace between 9:30 a.m. to 5:30 p.m. from Mon to Fri except on bank
holidays:
Corporate Responsibility
Community investment and development
Kotak Mahindra views company Social Responsibility as associate degree investment in
society and in its own future. Kotak uses the ability of its human and money capital to assist
in remodeling communities into vivacious, fascinating places for individuals to measure. The
cluster leverages its core competencies in 3 areas:
• Sustainability
An integral a part of all Kotak Mahindra cluster activities is to be systematically accountable
to shareholders, clients, employees, society and therefore the surroundings.
• Economic Development
By serving to individuals deliver the goods their money goals, Kotak strengthens the material
of communities and helps them overcome state and economic condition to assist them form
their future.
• Doing My Bit
A growing range of workers ar committed to civic leadership and responsibility with the
support and encouragement of the Kotak cluster. variety of workers are concerned in
strengthening communities through voluntary work, payroll giving and management inputs.
For any CSR connected queries, please contact:
Group CSR
Kotak Mahindra Bank Ltd
Tel. Board +91 twenty two 6720 6720
Email: cr@kotak.com

55
 CHAPTER-IV

DATA ANALYSIS & INTERPRETION

56
Size and growth of current assets and liabilities and Net working capital of KOTAK
MAHINDRA LTD during the period 2012-13 to2016-17.
(All amounts are in Cr)
Year Current Growth Current Growth Rate (%) Net W.C
Assets Rate (%) Liabilities
2012-13 31800.29 120 23803.06 120 7997.23
2013-14 41715.78 151.174215 29197.75 142.663851 14516
2014-15 52178.16 145.038173 32664.91 131.874751 19493.2
2015-16 55487.68 126.383548 36584.65 131.999849 18903
2016-17 72423.07 150.520991 58092.17 178.788317 16330.9

80000

70000

60000

50000 2010-11
2011-12
40000
2012-13
30000
2013-14
20000
2014-15
10000

0
Current Growth Current Growth Net W.C
Assets Rate (%) Liabilities Rate (%)

Interpretation:

The Current assets and the current liabilities of KOTAK MAHINDRA LTD are In the
increasing stage but at the financial year 2016-2017 it is in the decreasing stage because of
increasing in the current liabilities and the growth rate is 150.52. The net working capital is
also in the increasing stage.

57
 WORKING CAPITAL TURNOVER RATIO
(All amounts are in Cr)

Year
Sales(Income) Networking Capital Ratio

2012-13 4813.14 7997.23 0.601798

2013-14 7028.66 14516.03 0.561773
2014-15 9203.17 19493.20 0.472141
2015-16 12166.83 18903.03 0.537841
2016-17 13748.32 16330.92 0.8197882

Ratio
0.9
0.8
0.7
0.6
0.5
0.4 Ratio
0.3
0.2
0.1
0
2012-13 2013-14 2011-12
2010-11 2014-15
2012-13 2015-162014-152016-17
2013-14

Turnover Ratio:

Debtors Turnover Ratio expresses the relationship between debtors and sales. A high Debtors
Turnover Ratio or low Debt collection period is indicative of sound credit management
policy.

58
Table shows Debtors Turnover Ratio of KOTAK MAHINDRA LTD. during 2012-13 to
2016-17.

(All amounts are in Cr)

Year Net Credit Sales(Income) Avg. Debt Ratio

2012-13 4813.14 40984.92
0.137388
2013-14 7028.66 55152.04
0.147488
2014-15 9203.17 71639.39
0.148824
2015-16 12166.83 71967.91
0.161468
2016-17 13748.32 87012.02
0.155022

Ratio
0.16
0.14
0.12
0.1
0.08
Ratio
0.06
0.04
0.02
0
2012-132010-11 2013-14
2011-12 2014-15
2012-13 2015-162014-15
2013-14 2016-17

From the above table, it is observed that the KOTAK MAHINDRA LTDdebtor’s turnover
ratio shows a good sigh. The company noted a maximum ratio of 16.14 in the year 2015-16
and the minimum ratio in the year of 2013-14 is 13.73. present year i.e on 2016-17 is 15.50.

If we observed the above table the ratio is increasing the year 2012-13 is 13.73 in the year
2013-14 in the year but it is decreased in the year 2015-16. It shows a good sign for the
company.

59
Current Ratio:
It is the ratio of the current assets current liabilities this ratio is used to know the company’s
ability to meet its current obligations. The standard norm for the current ratio is 2:1
Current ratio = current Assets / Current liabilities.
Table showing current ratio of KOTAK MAHINDRA LTDduring the period 2012-13 to
2016-17
(All amounts are in Cr)

Year Current Assets Current Liabilities Ratio

2012-13 31800.29 23803.06

1.335975
2013-14 41715.78 29197.75
1.428664
2014-15 52178.16 32664.91
1.596763
2015-16 55487.68 36584.71
1.516690
2016-17 72423.07 58092.17
1.246692

80000

70000

60000

50000
Current Assets
40000
Current Liabilities
30000 Ratio

20000

10000

0
2012-132010-11 2013-14 2014-152014-15 2015-16
2011-12 2012-13 2013-14 2016-17

It is observed that the KOTAK MAHINDRA LTDcurrent rationing a increasing trend; the
company’s liquidity position is satisfactory
The current ratio increased slightly up to 2013-14 is 1.42. But in 2012-13 it declined because
of increase in current liabilities, and then it started to decrease further in2012-13 as 0.33. if
the company maintains to increase the ratio it can meet obligations.

60
Quick Ratio:
Quick ratio is relation between quick assets and current liabilities. The term quick assets,
which can be converted into cash with a short notice. This category also includes cash bank
balances short – term investments and receivables.
Quick ratio = Quick Assets / current liabilities
Table showing quick ratio of KOTAK MAHINDRA LTDduring the period 2012-13 to
2016-17.
(All amounts are in Cr)

Year Quick Assets Current Liabilities Ratio

2012-13 31800.29 23803.06 1.335975

2013-14 41715.78 29197.75 1.428664
2014-15 52178.16 32664.91 1.596763
2015-16 53987.54 36584.71 1.475685
2016-17 62548.67 58092.17 1.076716

70000

60000

50000

40000 Quick Assets

Current Liabilities
30000
Ratio
20000

10000

0
2012-132010-11 2011-12
2013-14 2012-13 2013-14
2014-15 2014-15 2015-16 2016-17

It is observed that the KOTAK MAHINDRA LTDcurrent rationing a increasing trend; the
company’s liquidity position is satisfactory
The current ratio increased slightly up to 2012-13 is 1.33. But in 2012-13 it declined because
of increase in current liabilities, and then it started to decrease further in2016-17 as 1.07. if
the company maintains to increase the ratio it can meet obligations

61
 Composition of current Assets
(all the amounts are in Cr)

Particulars 2012-13 2013-14 2014-15 2015-16 2016-17 Avg.

Sundry 40984.92 55152.04 71639.39 71967.91 87012.02 326534.28

Debtors

Cash and 2127.72 2016.49 2207.90 2,948.23 3928.30 15208.64

Balance with
RBI
Advances 29329.31 39079.23 48468.98 53,027.63 66160.71 236065.86

Balance with 363.26 618.06 1681.26 3,031.66 2334.06 7828.3

bank

Total 72785.2 96845.8 143597.5 150975.43 179433.09

350000

300000

250000
Sundry Debtors
200000 Cash and Balance with RBI
Advances
150000
Balance with bank
100000 Total

50000

0
2010-11 2011-12
2012-13 2013-142012-13 2014-15
2013-14 2014-15 2015-16
Avg. 2016-17

The income statement is also called as income statement, it is considered to be the most

useful of all financial statements. It prepared by a business concern in order to know the

profit earned and loss sustained during a specified period. It explains what has happened to a

business as a result of operations between two balance sheet dates. For this purpose it

62
matches the revenues and cost incurred in the process of earning revenues and shows the net

profit earned or loss suffered during a particular period.

The nature of Income which is a focus of the income statement can be well understood if

business is taken as an organization that uses “Input” to produce “Output”. The output of the

goods and services that the business provides to its customers. The values of these outputs are

the goods and services that the business provides to its customers. The values of these outputs

art the amounts paid by the customers for them. These amounts are called “revenues” in the

accounting. The inputs are the economic resources used by the business in providing these

goods and services. These are termed “expenses” in accounting.

The comparative balance sheet analysis is the study of the same items, group of items and

computed items in two or more balance sheets of the same enterprise on different dates. The

changes in periodic balance sheet items reflect the conduct of a business. The changes can be

observed by comparison of the balance sheet at the beginning and at the end of a period and

these changes can help in informing an opinion about the progress of and enterprise.

Working capital turnover ratio Of KOTAK MAHINDRA LTD.

63
Implementing an effective working capital management system is an excellent way for many
companies to improve their earnings. The two main aspects of working capital management
are ratio analysis and management of individual components of working capital.

Working capital turnover ratio 2017

Working capital turnover ratio 2016 2017
Total current Assets
Sundry Debtors 71967.91 87012.02

Cash and Balances with RBI 2,948.23 3928.3

Balance with Bank 3,031.66 2334.06
Advances 53,027.63 66160.71

150975.43 179433.09
Total
Total Current Liabilities

Borrowings 14,895.58 14169.71

Other Liabilities 3,333.82 4857.97

Contingent Liabilities 46,903.54 68092.17

63,152.94 85099.83
Total

67842.49 74333.26
Net working capital
Increase\decrease in net working capital 6490.77

64
 180000
160000
140000
120000
100000
80000
60000
40000 Series1
20000
0 Series2
Working capital…

Increase\decrease in…
Working capital…

Cash and Balances…

Total

Net working capital

Advances

Total Current Liabilities

Total
Total current Assets

Balance with Bank

Contingent Liabilities
Other Liabilities
Sundry Debtors

Borrowings
Series3

Interpretation:
The networking capital of KOTAK MAHINDRA LTDhas been increased to 6490.77 Cr the
financial position i.e. the performance of KOTAK MAHINDRA LTDhas increased and the
current assets defects its current liability.

Working capital turnover ratio Of KOTAK MAHINDRA LTD

65
 Working capital turnover ratio 2016
Working capital turnover ratio 2015 2016
Total current Assets
Sundry Debtors 71639.39 71967.91

Cash and Balances with RBI 2207.90 2,948.23

Balance with Bank 1681.26 3,031.66
Advances 48468.98 53,027.63

143597.53 150975.43
Total
Total Current Liabilities

Borrowings 20412.62 14,895.58

Other Liabilities 2789.81 3,333.82
Contingent Liabilities 42137.47 46,903.54

65317.90 63,152.94
Total

58279.63 67842.49
Net working capital
Increase\decrease in net working capital 9562.86

66
 140000
120000
100000
80000
60000
40000
20000 Series1
0
Increase\decrease in…
Working capital…

Working capital…

Cash and Balances…

Series2
Net working capital
Total
Sundry Debtors

Other Liabilities
Total current Assets

Borrowings

Contingent Liabilities
Advances

Total
Balance with Bank

Total Current Liabilities

Interpretation:
The networking capital of KOTAK MAHINDRA LTDhas been increased to 9562.86 Cr the
financial position i.e. the performance of KOTAK MAHINDRA LTDhas increased and the
current assets defects its current liability.
Working capital turnover ratio 2015
67
 Working capital turnover ratio 2014 2015
Total current Assets
Sundry Debtors 55152.04 71639.39

Cash and Balances with RBI 2016.49 2207.90

Balance with Bank 618.06 1681.26

Advances 39079.23 48468.98

96845.82 143597.53
Total
Total Current Liabilities

Borrowings 16595.52 20412.62

Other Liabilities 2553.67 2789.81
Contingent Liabilities 17319.52 42137.47

36468.71 65317.90
Total

60377.13 58279.63
Net working capital
Increase\decrease in net working capital 2097.48

25000

20000

15000
Series1
10000 Series2
Series3
5000

-5000 2012-13 2013-14 2014-15 2015-16 2016-17

68
Interpretation:
The networking capital of KOTAK MAHINDRA LTDhas been decreased to 2097.48 Cr the
financial position i.e. the performance of KOTAK MAHINDRA LTDhas increased and the
current assets defects its current liability.

Working capital turnover ratio 2014

Working capital turnover ratio 2013 2014
Total current Assets
Sundry Debtors 40984.92 55152.04

Cash and Balances with RBI 2127.72 2016.49

Balance with Bank 363.26 618.06

Advances 29329.31 39079.23

72785.21 96845.82
Total
Total Current Liabilities

69
 Borrowings 13723.95 16595.52
Other Liabilities 3032.36 2553.67
Contingent Liabilities 14291.30 17319.52

27047.61 36468.71
Total

45737.6 60377.13
Net working capital
Increase\decrease in net working capital 16639.51

120000

100000

80000

60000

40000

20000

Interpretation:
The networking capital of KOTAK MAHINDRA LTDhas been increased to 60377.13 Cr the
financial position i.e. the performance of KOTAK MAHINDRA LTDhas increased and the
current assets defects its current liability.

70
 Working capital turnover ratio 2013

Working capital turnover ratio 2013

Working capital turnover ratio 2012 2013
Total current Assets
Sundry Debtors 30026.98 40984.92

Cash and Balances with RBI 2085.67 2127.72

Balance with Bank 216.59 363.26

Advances 20775.05 29329.31

53122.29 72785.21
Total
Total Current Liabilities

Borrowings 6160.51 13723.95

Other Liabilities 2869.42 3032.36
Contingent Liabilities 4176.17 14291.30

15166.08 27047.61
Total

39936.21 45737.6
Net working capital
Increase\decrease in net working capital 5801.39

71
 80000

70000

60000

50000

40000

30000

20000

10000

Interpretation:
The networking capital of KOTAK MAHINDRA LTDhas been increased to 45737.60 Cr the
financial position i.e. the performance of KOTAK MAHINDRA LTDhas increased and the
current assets defects its current liability.

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 CHAPTER-V
 FINDINGS

 CONCLUSIONS

 SUGGESTIONS

 BIBLIOGRAPHY

FINDINGS

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 1. The KOTAK MAHINDRA LTDnet working capital is satisfactory between the years

2013-17 since it shows increasing trend ; but after that it is in declining position.

2. The current ratio of KOTAK MAHINDRA LTDis satisfactory during the period of

study 2012-13 to 2016-17. It is increased but after that it is declining.

3. The average quick ratio of KOTAK MAHINDRA LTDis not good though the quick

ratio is showing maximum value of 1.07 in the year 2016-17 and then it is declining

to be deal.

4. Fixed assets turnover ratio of KOTAK MAHINDRA LTDincreased. The company

has to maintain this.

5. Inventory turnover ratio of KOTAK MAHINDRA LTDis also increased gradually,

without any fit falls up to 2012-13. In the year 2012-13 it is inclined, and again it has

increased in the year 2016-17. Good inventory management is good sign for efficient

management

6. Total Assets turnover ratio of KOTAK MAHINDRA LTDis not satisfactory because

it is always below one, except in the year 2016-17 having a value of 5.67

7. Return on investment is not satisfactory. This indicates that the company’s funds are

not being utilized in a better way.

CONCLUSIONS

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 1. The KOTAK MAHINDRA LTDNet Profit Ratio is showing profit in the year 2009-

12. These event is an expected one because since from the previous two years it is

showing the decline stage in Net Profit Ratio.

2. Profit Margin of KOTAK MAHINDRA LTDis decreasing and showing negative

profit because there is increase in the price of banking services.

3. The KOTAK MAHINDRA LTDNet Working Capital Ratio is satisfactory.

4. The KOTAK MAHINDRA LTDreturn on Total Assets ratio shows a negative sign in

the year 2012-13

5. The Operating Ratio of KOTAK MAHINDRA LTDincrease in the year 2012-13, in

the year 2016-17 and reached in the year 2015-16 So the company has to reduce its

operating costs.

6. The Operating Ratio of KOTAK MAHINDRA LTDsatisfactory. Due to increase in

cost of production, this ratio is decreasing. So the has to reduce its office

administration expenses

SUGGESTIONS

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1. Improve position funds should be utilized properly.

2. Better Awareness to increase the sales is suggested.

3. Cost cut down mechanics can be employed.

4. Better production technique can be employed.

5. The investment on raw material should be made as per the requirement. Unnecessary
investment may block up the funds.
6. Neither too high nor too low inventory turnover ratios may reduce profit and liquidity
position of the industry. So, proper balance should be made to increase profits and to
ensure liquidity.
7. The raw material should be acquired from the right source at right quality and at right
cost.
8. The process that was being used by KOTAK MAHINDRA LTDwith the purchasing
department should undergo changes; so that, it seeks enhance the celerity of the
delivery of a product without compromising its quality by improving the utilization of
materials, labor and equipment.

BIBLIOGRAPHY

BOOKS

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Financial Management Written By M.Y. Khan & P.K. Jain

Financial Management Written By Prasanna Chandra

Financial Management Written By I. M. Pandey

Financial Management Written By S. N. Maheswari

Annual reports of KOTAK MAHINDRA LTD: 2013-2017.

www.kotak.com

www.heritage.com

www.pepsico.com

www.techmahindra.com

www.tatamotors.com

www.hdfcbank.com

www.bankingindia.com

www.evanimics.com

www.damodaram.com

www.investopedia.com

www.valuebasedmanagement.net

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