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AN EVALUATION OF WORKING CAPITAL MANAGEMENT IN

BAJAJ ALLIANZ LIFE INSURANCE DHARMAPURI DISC

PROJECT REPORT

Submitted by

RAJASEKAR.G

REGISTER NUMBER: 612711631010

In partial fulfillment for the award of the degree


of
MASTER OF BUSINESS ADMINISTRATION
IN
DEPARTMENT OF MANAGEMENT STUDIES
THE KAVERY ENGINEERING COLLEGE,
MECHERI.
JULY 2017

DEPARTMENT OF MANAGEMENT STUDIES


PROJECT WORK

PHASE-II

JULY-2017

This is to certify that the project work entitled

“”AN EVALUATION OF WORKING CAPITAL MANAGEMENT


IN BAJAJ ALLIANZ LIFE INSURANCE DHARMAPURI DIST

Is the bonafide record of project work done by

RAJASEKAR.G
REGISTER NO:612711631010
Of MBA during the year 2016-2018.

................................ ……………………….
Project Guide Head of the Department
(T.SATHYATHANGAM, B.E.,MBA)

Submitted for viva-voce examination held on ………………….

………………………… ……………………………..
Internal examiner External examiner
DECLARATION

I affirm that the project work titled AN is being submitted in partial fulfillment for the award of

Department ofManagement Studies (MBA) is the original work carried AN EVALUATION OF

WORKING CAPITAL MANAGEMENT IN BAJAJ ALLIANZ LIFE INSURANCE

DHARMAPURI DISC

out by me. It has not formed thepart of any other project work submitted for award of any

degree or diploma, either in this orany other university.

(Signature of the candidate)


RAJASEKAR.G
RGE.NO:612716631010

I certify that the declaration made above by the candidate is true

Signature of the Guide,

T.SATHIYATHANGAM,B.E., MBA.,
ACKNOWLEDGEMENT

I take it to be a privilege to express my sincere thanks and gratitude to management for

Prof.S.OBLI,B.E (Hons).,M.sc (Engg)., Dean, The kavery Engineering college for

encouraging in my all endeavor.

I would like to my deep sense of gratitude Prof. Dr. S.DURAISAMY, B.E., M.S.,

M.Tech., Ph.D., Principal, The Kavery Engineering College for the valuable advices and

suggestions he gave me to accomplish this task successfully.

I have a great wish to place on record my profound gratitude to Prof. Dr.

S.LEELACHITHRA,MBA.,M.Phil.,Ph.D., Head of the Department of Management

Studies for giving me the opportunities to complete this project successfully and his

valuable guidance and the timely advice given to me.

I would like to express my special and heartiest thanks to , MBA., Lecturer of the

Department of Management Studies for his excellent guidance and having spent her

valuable time and attention.

I acknowledge with gratitude,the whole hearted co-operation and help rendered by all

other members of Department of Management Studies, The Kavery Engineering College

during my period of study.

I extend my gratitude to parents and friends and friends and all other who helped me

directly and indirectly by every means to complete this project successfully.


INDEX

Chapter No. Particulars Page No.

Executive Summary

1. Introduction 1-3

2. Profile of the organization 4-8

3. Research Methodology 9

4. Conceptual Background 10-24

5. Data presentation and interpretation 25-39

6. Finding, Suggestions and conclusion 40-42

Limitations 43
7.

Bibliography
Appendix

EXECUTIVE SUMMARY
Executive Summary:
Working Capital is the required for maintenance of day to day business operations. The present day
competitive market environment calls for an efficient management of working capital. The reason for this is
attributed to the fact that an ineffective working capital management mat force the form to stop its business
operations, may even lead to bankruptcy. Hence the goal of working capital management is not just
concerned with the management of current assets and current liabilities but also in maintaining a satisfactory
level of working capital.

Holding current assets in substantial amount strengthens the liquidity position and reduces the
riskiness but only at the expense of profitability. Therefore achieving risk-return tradeoff is significant in
holding of current assets. While cash outflows are predictable it runs contrary in case of case of cash
inflows. Sales program of any business concern does not bring back cash immediately. There is a time lag
that exists between sale of goods of services and sales realization. The capital requirement during this time
lag is maintained by the operating cycle concept.

This study gives in detail the working capital management practices in BALIC. Management of each
current asset, namely cash management, accounts receivable management is studied permanent to BALIC.
Similarly management of accounts payable, deposit are studied to understand the managing of current
liabilities. A part from this concept of operating cycle is studied.

The research methodology adopted for this study is mainly from secondary source of data which
include annual reports of BALIC, and website of the company. The use of primary sources is limited to
interviews with few of the employees in credit department.

The study of working capital management has shown that BALIC has a strong working capital position. The
Company is also enjoying reasonable profits.
INTRODUCTION

The overall success of the company depends upon its working capital position. So it should
be handled properly because it shows the efficiency & financial strength of a company.

WCM is highly important in firms as it is used to generate further returns for the
stakeholders.
Working Capital Management is a very important fact of financialmanagement due to:
 Investments in current assets represent a substantial portion of
total investment.
 Investment in current assets & the level of current liabilities have tobe geared
quickly to change sales.

The working capital is the life blood & nerve center of a business firm. The importance of
working capital in any industry needs no special emphasis. No business can run effectively
without a sufficient quantity of working capital.

It is crucial to retain right level of working capital. WCM is one of the most important
functions of corporate management. A business enterprises with ample working capital is
always in a position to avail advantages of any favorable opportunity either to buy raw
material or to implement a special order or to wait for enhanced market status.

Working capital can be utilized for operating costs that are involved in the everyday life of
business. Even very successful business owners may need working capital funds when the
unexpected circumstances arise.

WCM is highly important in firms as it is used to generate further return for the
stakeholders. When working capital is managed improperly, allocating more than enough of
it will render management non-efficient & reduce the benefits of short term investments. On
the other hand, if working capital is too low, the company may miss a lot of profitable
investment opportunities or suffer short term liquidity crises, leading to degradation of
company credit, as it cannot respond effectively to temporary capital requirements.

1
2
Some the points to be studied under this topic are:
How much cash should a firm hold?
What should be the firm’s credit policy?
How to & when to pay the creditors of the firm?

OBJECTIVES

The objectives of project on evaluation of working capital are as


follows:

1. To study concept of working capital & components of


working capital.
2. To study change of working capital.
3. To analyze profitability, liquidity & working capital position
of the company.

SCOPE

The management of working capital helps us to maintain the working


capital at asatisfactory level by managing the current assets and current
liabilities. It also helps tomaintain proper balance between profitability,
risk and liquidity of the businesssignificantly.
By managing the working capital, current liabilities are paid in time. If
the firm makespayment to it creditors for raw material in time, it can
have the availability of rawmaterial regularly, which does not cause any
obstacles in production process. Adequateworking capital increases
paying capacity of the business but the excess working capitalcauses
more inventory, increases the possibility of delay in realization of
debts.On the other hand, absence of adequate working capital leads to
decrease in return oninvestment. The goodwill of the firm is also
adversely affected due to the inability to paycurrent liabilities in time.
Hence, the management of working capital helps to manage all the
factors affecting theworking capital in the most profitable manner.

4
Limitation of the study:

The scope of the present study has been limited interns of period of
study as well as sources and nature of data. The period covered by the
study extends over 5 years from F.Y 2008/9 to 2011/12. At the time of
study, the data could be available up to 2011/12. The limitations of this
study are as follows:

1. The study is mainly on secondary data. It is cone mostly on the


basis of and published financial documents, like balance sheet,
profit and loss account and other related journals, magazines
and books etc.
2. The study follows with specific tools financial ratio analysis.
3. The lack of sufficient time and resources is another limitation of
the study. The study is fully based on the student’s financial
resources and is to be completed within limited time. The report
has taken only 5-years data for the study from year 2008/09 to
2012/13.
4. The study is limited from the point of view of submission on
partial fulfillment of the requirement for the Master degree in
Business Administration(MBA).

5
BAJAJ ALLIANZ LIFE INSURANCE

Name and location of the Company:

Name: Bajaj Allianz Life Insurance Company

Address: GE Plaza, Airport Road, Yerawada, Pune


411006

Tel: +91 020 66026777

Fax : +91 020 66026789

E-mail : websaleslife@bajajallianz.co.in

Introduction:

Bajaj Allianz Life Insurance is a union between Allianz SE, one of the
largest Insurance Company and Bajaj Finserv.

Allianz SE is a leading insurance conglomerate globally and one of the


largest asset managers in the world, managing assets worth over a
Trillion (Over INR. 55,00,000Crores). Allianz SE has over 119 years of
financial experience and is present in over 70 countries around the
world.

6
At Bajaj Allianz Life Insurance, customer delight is our guiding
principle. Our business philosophy is to ensure excellent insurance and
investment solutions by offering customized products, supported by the
best technology.

Vision:

 To be the first choice insurer for customers


 To be the preferred employer for staff in the insurance
industry
 To be the number one insurer for creating shareholder
value

Mission:

As a responsible, customer focused market leader, we will strive to


understand the insurance needs of the consumers and translate it into
affordable products that deliver value for money.

Our Achievements:

Bajaj Allianz has received IAAA rating, From ICRA Limited, an


associate of Moody’s Investors Service, for Claims Paying ability. This
rating indicates highest claims paying ability and a fundamentally
strong position.

Awards:

 Best Insurance Company in Private sector at the IPE Banking


Financial Service and Insurance (BFSI) 2013.
 SKOCH Financial Inclusion-Organization of the year 2013.

7
 Best Life Insurance Provider (Runner up) at the Outlook Money
Award 2012.
 Best Investor Education and Category Enhancement.
 Best utilization of Information Technology.
 SKOCH Financial Inclusion Award.

Member in Board of Director:

Chairman Rahul Bajaj

8
Niraj Bajaj

Sanjiv Bajaj

S.H Khan
Directors
Ranjit Gupta

Sanjay Asher

Suraj Mehta

Manu Tandon

FACTSHEET
Date of Incorporation 12th March 2001
1
Started Operation on 3rd August 2001
2

9
Head office Pune, India
3
WorldWide Web Address www.bajajallianz.com
4
Toll free number 1800-209-5858
5
Brand Statement JiyoBefikar
6
Chairman Mr. Sanjiv Bajaj
7
MD & CEO Mr.V.Philip
8
Total assets under Management 38,003 crore*
9
Solvency ratio 643.31%**
10
Claim Settlement Ratio NOP 91.56%**
11
Total no. of lives covered 1.56crore**
12
Total no. of office 992*
13
Latest Award Won 1.SKOCH Financial Inclusion
14 2013- Organization of the Year
2.SKOCH Financial Inclusion
for Micro Insurance initiatives
following categories:
 Micro Insurance Initiat
Securing the Unsecured
 Setting the Claims at
Nominee’s doorsteps
 Insurance Awareness &
Education
 Micro Insurance Renew
Persistency Manageme

Sour product cater to all the financial needs like – Protection, Savings, Retirements, Inv
15 & Health for Individuals and Groups

Note: *The value are as on 31st March 2016


** The values are for FY 2015-16

10
Growing at a breakneck pace with a strong pan Indian
presence Bajaj Allianz has emerged as a strong player in
India...

Bajaj Allianz Life Insurance Company Limited is a joint venture


between two leading conglomerates Allianz AG and Bajaj Auto
Limited.
Characterized by global presence with a local focus and driven by
customer orientation to establish high earnings potential and financial
strength, Bajaj Allianz Life Insurance Co. Ltd. was incorporated on
12th March 2001. The company received the Insurance Regulatory and
Development Authority (IRDA) certificate of Registration (R3) No 116
on 3rd August 2001 to conduct Life Insurance business in India.

Product:

 Life Insurance
 Motor Insurance
 Health Insurance
 Travel Insurance
 Home Insurance

Channel Partner:

1. Standard Chartered Bank

2. Dhanlaxmi Bank

3. Team Life Care Co. India Ltd.

11
The data in this project is enabling in secondary in nature.
Financial reports, company records were referred for data analysis. The
study has been undertaken by collecting relevant data from the balance
sheet, profit and loss a/c, annul report & Audit report of the BALIC the
company is used financial tools for the analyzing and interpretation
data.

However primary data is also collected by observation


discussing with company officials. This primary data is used to fill in
the gaps while preparing this report and to know the latest procedures
adopted by the company. This has helped to draw inferences and
conclusions.

Sources of data

This study is based on Secondary data:-

The secondary data are those, which have been collected


by some other and which have been processed. Generally speaking
secondary data are information, which have been previously
collected by some organization to satisfy his own need. But the
department under reference for an entirely different reason is using
it.

For this project secondary sources used are:

1. Annual reports of the company.


2. Company website
3. Books
4. Other company documents

12
SAMPLING DESIGN

0 Sampling unit : Financial Statements & Audit


Reports
1 Sampling Size :Last four years financial
statements

WORKING CAPITAL:

Introduction:

Financial management looks after two types of capital need: for fixed
capital to invest it tings such as buildings, plants &equipments and
working capital principally to pay for stock and to cover the amount of
credit extended to customers. Fixed capital, as the name implies, tends
not vary in the short but to move up or down in jumps when major
investment decisions are made (or assets sold). Working capital on the
other hand, is much more fluid and fluctuates with level of business.

Working capital is a furnish investment in short term assets. Working


capital is the firm’s investment in short term assets cash, short term
securities. Account receivables and inventories.

Working capital management is the important branch of the financial


management which gives answers the questions such as:

1. How much should we invest in each category of current assets?

2. How should we finance this investment in current assets i.e.


appropriate mix of short and long term sources to finance?

13
In most business, funds are deployed in assets which are in the form of
cash or bank deposits or will be turned into cash in a relatively short
period as part of normal business activities. In short the working capital
is the sources of financing current assets and it includes short as well as
long term financing.

The management of the funds of business can be described as financial


management. Financial management is mainly concerned with two
aspects. Firstly, Fixed assets and fixed liabilities, in other words, long
term investment and sources of funds. Secondly, current assets and
current liabilities. Both of these types of funds play a vital role in
business finance.

Management of working capital usually involves management or


administration of current assets, namely cash, marketable securities,
account receivables and inventories and also the administration of
current liabilities such as creditors, account payable, notes and bills
payables, bank overdraft, outstanding expenses, temporary loans and
provisions. A firm should always maintain the right cash balance so
that flow of funds is maintained at a desirable speed not allowing
slowdowns or stoppage. Thus, the enterprises can have a balance
between liquidity and profitability.

The term working capital is often used to refer the firm’s current assets
like primarily cash, marketable securities, account receivables and
inventories. Working capital refers to the fact that most of its
components have their impact over weeks and month rather than years.
For this reason, working capital management is often referred to as
short-term finance. The term working capital is closely related to the
term funds and has two common meaning. It is used to mean current
assets of current assets means current liabilities.

Working capital management is concerned with the problems that arise


in attempting to manage the current assets. The term current assets

14
refers to those assets which is ordinary course of business can be or
will be turned into cash within one year without undergoing a
diminution in value and with our disrupting the operations of the firm.
The major current assets are cash, marketable securities, account
receivables and inventory.

Current liabilities are those liabilities, which are intended at their


inception to be paid in the ordinary course of business within a year,
out of the current assets of earnings of the concern. The basis current
liabilities are accounts payable, bank overdraft and outstanding
expenses. The goal of working capital management is to management
the firm’s current assets and current liabilities in such a way that a
satisfactory level of working capital is maintained.

This is so because if the firm cannot maintainto satisfactory level of


working capital, it is likely to become insolvent and may be forced into
bankruptcy. The current assets should be large enough to cover its
current liabilities in order to ensure a reasonable margin of safety. Each
of the current assets must manage efficiently in order to maintain the
liquidity of the firm while not keeping too high level of any of them.
Each of the short-team sources of financing must be continuously
managed to ensure that they are abstained and used in the best possible
way. The interaction between current assets and current liabilities is,
therefore, the main theme of the theory of working capital
management.

Working capital may be defined more particularly as the assets held for
current use within a business less the amount due to those who await
settlement in short term in whatever form. Working capital is an
important aspect manufacturing compares that have so far developed
country. Among all available options proper management of working
capital is the only best possible option to improve their operational
viability. Working capital is the financial management practice in
manufacturing enterprises. Working capital represents portion that

15
circulates from one form to another in the ordinary conduct of business.
This idea embraces recurring transaction from cash to inventories to
receivable to cash that forms the conventional chain of business
operations.

Fund deployed for short term are mainly for working capital or
operational purpose. Towards the day-to-day operation, a firm will
have to provide money towards the purchase of raw materials, payment
of wage and salaries to extend credit to buyers of goods as well as to
meet other day to day operations.

By analyzing about the working capital, we concluded that, all the


corporations. Weather public or private, manufacturing or non-
manufacturing have just adequate working capital to serve in
competitive market. It is because excessive or inadequate working
capital is dangerous from the firm’s point of view. Excessive
investment on working capital affects a firms’ profitability just idle
investment, yields nothing. In the same way, inadequate investment on
working capital affects the liquidity position of the company and leads
to financial embarrassment and failure of the company.

It is therefore, recognized fact that any mistake made in management of


working capital can lead to adverse effects in business and reduced the
liquidity, turnover, profitability and increases the cost of financing of
the enterprises.

DEFINITIONS OF WORKING CAPITAL:


The following are the most important definitions of Working capital:

1) Working capital is the difference between the inflow and outflow of


funds. In other words it is the net cash inflow.

16
2) Working capital represents the total of all current assets. In other
words it is the Gross working capital, it is also known as Circulating
capital or Current capital for current assets are rotating in their nature.
3) Working capital is defined as The excess of current assets over
current liabilities and provisions. In other words it is the Net Current
Assets or Net Working Capital

CONCEPTS OF WORKING CAPITAL:

There are two concepts of working capital:- gross & net. Gross
working capital, simply called working capital, refers to the firm’s
investment in current assets. Current assets are the assets which can be
converted into cash within an accounting period (or operating
cycle)and cash, short-term securities, receivables, debtors and stock
(inventory) are included in current assets. Net working capital refers to
the difference between current assets and current liabilities. Current
liabilities are those claims of outsiders, which are expected to mature
for payment within an accounting periodand include creditors, bills
payableand outstanding expenses.

1) Gross working capital:

According to this concept, total current assets are working capital


which presents both owned capital as well as loan capital used for
financing current assets. It includes cash, short-term securities and
receivables inventories. These assets can be converted into cash within
a year. Generally, when it comes to current assets, cash is the most
valuable element because it is immediately available to settle bills and
debtors are more value than stock which is nearer to being turned into
cash. The gross concept of working capital refers to the amount funds
invested in short-term assets that are employed in the enterprise. Gross
working capital is the firm’s total current asset and net working capital
is current assets minus current liabilities.

17
Another name of gross working capital is circulating capital.
Circulating capital means circular flow of cash. This is also called
operating cycle in case of manufacturing firm. This cycle starts with
which is used to pay for raw materials. Raw materials are converted
into work-in progress which is again converted into finished goods.
When it is ready for sale, it is a circular cash-flow from cash into
inventories to receivables and back to cash, this cycle will be repeat
again for the whole life of the firm.

The value represented by current assets circulates from one working


capital to another working capital from purchase accounts to goods
manufacturing accounts. From inventory accounts to sales accounts,
from sales accounts to cash accounts, this is described as circulating
nature of current assets of in other work working capital has circulating
nature. The speed of circulating of working capital of the turnover of
current assets is an indicator of degree of efficiency of the
management. The faster the turnover shows the higher degree of
efficiency.

The working capital cycle can be presented in the diagram as:

18
CASH CREDITORS

COLLECTION PAYMENTS

RAW MATERIALS
DEBTORS

SALES

PRODUCTION

FINISHED GOODS WORK-IN-


PROGRESS

VALUE ADDED CONVERSION

Figure: 4.1 The working capital cycle of manufacturing firms.

If the business is profitable the firm’s assets at the end of each cycle will be
greater than the original investment. In this manner, each cycle will
produce a gross profit, and the amount of net earnings for the year will
depend. In part, on number of times the cycle occurs or how measured
by the ratio of sales to current assets. The higher the ratio, the more
efficiency the operations, fewer current assets are needed to support
each dollar of sales.

The flow of working capital does not always proceeds as it is pre-


planned when it moves through different stage of cash cycle, for
example, sales may decline due to can in consumer taste, slow
economy and receivable become more difficult to collect the working
capital cycle will be interrupted. This leads to decline in profitability
and firm could suffer bankruptcy if this adverse situation prevails for
sometimes.

19
There is also a much shorter cycle of activity where in goods and
materials are held for manufacture and sale, and credit is advanced to
customers for rapid conversion into cash to provide the funds with
which to continue in business and to make a profit distribution
possible.

The working capital cycle shown in figure 4.1 is theoperating cycle for
non- manufacturing firm where, cash is required to purchase raw
materials which are needed to convert into work-in- progress, which is
again converted into finished goods. Are sold for cash and credit and
ultimately debtors will be realized.

The non manufacturing firms such as wholesalers and retailers do not


manufacture goods. So, they have the direct conversion of cash into stock of
finished goods into debtors and then into cash. This can be shown
graphically as:

CASH

DEBTORS STOCK OF FINISHED GOODS

Figure: 4.2 Operation cycle of non-manufacturing


firms.

Sometimes service and financial concerns may not have any inventory.
In this case the operations cycle will be shortest as follows:

20
CASH DEBTORS

Figure: 4.3 Operating cycle of service and financial


firms.

The gross capital working capital focuses on two aspects of


current assets management:

a) Optimum investment in current assets: As state earlier, both


excessive and inadequate investment is harmful for the
business. This aspectsthus, emphasis on the optimum adequate
level of current assets, working capital depends upon the
business activated. It also changes with the change in business
activities. This may cause excess or shortage of working capital
frequently. The management should be active and alert to
correct the imbalance.
b) Financing of current assets: This aspect focus on the need of
arranging funds to finance current assets when more working
capital is required due to the increase in business activities.
Then the arrangement should be made quickly. Similarly, when
surplus funds arise, then they should be invested in short term
securities.

2) Net working capital:

Net working capital comprises short term net assets: stock, debtors
and cash less creditors. Working capital management then is to do
with management of all aspects of both current assets and current
liabilities, so as to minimize the risk of insolvency while
maximizing return on assets.

Net working capital represents the excess of total current assets


over total current liabilities. It is a qualitative concept which shows
the financial soundness of current financial position. Net working

21
capital may be positive or negative according to the size of current
assets and current liabilities. Current assets should be sufficiently in
excess of current liabilities for the positive working capital. This
concept lives idea about the case and cost of raising working capital
to the management.

Not only for the management, is it also a major importance to


investors and lenders. They always like a company to maintain
current assets should be two fold of current liabilities and these
concepts is measured by the current ratio via current assets
÷current liabilities. Which should be 4:1. A large ratio indicates
greater solvency and makes it unsafe and unsound. A negative
working capital denotes negative liquidity which is also dangerous
for the company.

Management should always be alert to improve the imbalance in


the liquidity position of the firm. Mathematically, it is presented as:

Net working capital ˭ Current assets – Current liabilities

An alternatives definition of net working capital is that portion of a


firm’s current assets financed with long term funds.

For every firm today, minimum portion of working capital is


financed with the permanent sources of funds such as owners’
capital, debentures, long-term debt, and preference capital or
retained earnings; this portion of working capital which is financed
with long term funds is called permanent working capital.
Management must therefore, decide the extent to which current
assets should be financed with equity capital or/ and borrowed
capital.

Both the concepts of working capital, gross and net, are not
mutually exclusive, however. They are equally important from the
management point of view in the gross concept points out two

22
important aspects of current assets: (i) Optimum investment in each
of the component of current assets and (ii)Financing of these
current assets; while the net concept indicates (i) The liquidity
position and (ii) The extent to which working capital may be
financed by permanent sources of funds. Both the concepts have
their own advantages and disadvantages, which concept to choose
depend upon the purpose of the firm. The concept of gross capital is
a financial concept where as that of net concept is an accounting
concept. Management is interested in current assets to operate the
business with efficiency. To evaluate the efficiency, gross concept is
appropriate. On the other hand interest of investors and lenders is in
concept of net working capital because it helps in the judgment if
liquidity position of the enterprise.

4.3) Objective of Working capital:

Even profitability companies fail if they have inadequate cash flow.


Liabilities dare settled with cash and net profits. The primary
objective of working capital management is to ensure that sufficient
cash is available to:

 Meet day to day cash flow needs;


 Pay wages and salaries when they fall due;
 Pay creditors to ensure continued suppliers of goods and
services;
 Pay government taxation and providers of cash dividends; and
 Ensure the long term survival of the business entity.

4.4) IMPORTANCE OF WORKING CAPITAL

23
Working capital may be regarded as the lifeblood of the business.
Without insufficient working capital, any business organization cannot
run smoothly or successfully.

In the business the Working capital is comparable to the blood of the


human body. Therefore the study of working capital is of major
importance to the internal and external analysis because of its close
relationship with the current day to day operations of a business. The
inadequacy or
mismanagement of working capital is the leading cause of business
failures.

To meet the current requirements of a business enterprise such as the


purchases of services, raw materials etc. working capital is essential. It
is also pointed out that workings.

Growth and Expansion Activities

As a company grows, logically, larger amount of working capital will


be needed, though it is difficult to state any firm rules regarding the
relationship between growth in the volume of a firm's business and its
working capital needs. The fact to recognize is that the need for
increased working capital funds may precede the growth in business
activities, rather than following it. The shift in composition of working
capital in a company may be observed with changes in economic
circumstances and corporate practices. Growing industries require
more working capital than those that are static.

Operating Efficiency

Operating efficiency means optimum utilization of resources. The firm


can minimize its need for working capital by efficiently controlling its
operating costs. With in-creased operating efficiency the use of

24
working capital is improved and pace of cash cycle is accelerated.
Better utilization of resources improves profitability and helps in
relieving the pressure on working capital.

Price Level Changes

Generally, rising price level requires a higher investment in working


capital. With increasing prices the same levels of current assets need
enhanced investment. However, firms which can immediately revise
prices of their products upwards may not face a severe working capital
problem in periods of rising levels. The effects of increasing price level
may, however, be felt differently by different firms due to variations in
individual prices. It is possible that some companies may not be
affected by the rising prices, whereas others may be badly hit by it.

Other Factors

There are some other factors, which affect the determination of the
need for working capital. A high net profit margin contributes towards
the working capital pool. The net profit is a source of working capital
to the extent it has been earned in cash. The cash inflow can be
calculated by adjusting non-cash items such as depreciation, out-
standing expenses, losses written off, etc, from the net profit, (as
discussed in Unit 6).

The firm's appropriation policy, that is, the policy to retain or distribute
profits also has a bearing on working capital. Payment of dividend
consumes cash resources and thus reduces the firm ',s working capital
to that extent. If the profits are retained in the business, the firm's
working capital position will be strengthened.

In general, working capital needs also depend upon the means of


transport and communication. If they are not well developed, the
industries will have to keep huge stocks of raw materials, spares,

25
finished goods, etc. at places of production, as well as at distribution
outlets.

4.5) Determinants of working capital:

There are no hard and fast rules or certain formulae to determine the
working capital requirement of the firm. The importance of efficient
working capital management is an aspect of overall financial
management. Thus a firm plans its operations with adequate working
capital requirement or it should have neither too excess nor too
inadequate working capital. A number of factors affect the working
capital. Generally, the following factors affect the working capital
requirement of the firm.

i)Nature and size of business:

The working capital requirement of a firm is basically related size and


nature of the business. If the size of the firm is bigger, then or requires
more working capital whereas small firm needs less working capital
relatively to public utilities.

ii) Manufacturing Cycle:

Working capital requirement of an enterprise are also influenced by the


manufacturing or production cycle. It refers to the time involved to
make finished goods from the raw materials. During the process of
manufacturing cycle funds are tied up longer the manufacturing cycle,
the larger will be working capital requirement and vice-versa.

iii) Production Policy:

Working capital requirement is also determined by its production


policy. If a firm produces seasonal foods, the its production and sales
volume fluctuate with different seasons. This type of fluctuating policy
affects the working capital policy of the firm.

26
iv) Credit Policy:

Credit policy affects the working capital of a firm. Working capital


requirement depends on terms of sales. Different term may be followed
by different customers according to their credit worthiness. If the firm
follows the liberal credit policy, then it requires more working capital.
Conversely, if a firm follows the stringent policy, it requires less
working capital.

v) Availability of Credit:

Availability of credit facility is another factor that affects the working


capital requirement. If the creditors avail a liberal credit terms then the
firm will need less working capital and vice-versa. In other works, the
firm can get credit facility easily on favorable conditions. Thus, it
requires less working capital to run the firm otherwise more working
capital is required to operate the firm smoothly.

vi) Growth and Expansion:

Growth and expansion also affects the working capital requirement of


firm. However, it is difficult to precise; determine the relationship
between the growth and expansion of the firm and working capital
needs, however, the other things being the same growing firms needs
more working capital than those static ones.

vii) Price level Change:

Price level change also affects the working capital requirement of a


firm. Generally, a firm requires maintaining the higher amount of
working capital, if the price level rises. Because the same level of
current assets needs more due to the increasing price. In conclusion, the
implications of changing price level of working capital position will
vary from firm to firm depending on the nature and another relevant
consideration of the operation of the conserned firm.

viii) Operating Efficiency:

27
Operating efficiency is also an important factor, which influences the
working capital requirements of the firm. It refers to the efficient
utilization of available resources at minimum cost. Thus, financial
manager can contribute to strong working capital position through
operating efficiency. If a firm has strong operation efficiency then it
needs lesser amount of working capital and vice-versa.

ix) Profit Margin:

The level of profit margin differs from firm to firm. It depends upon
the nature and quality of product has a sound marketing management
and enjoy the monopoly power in the market then it earns quite high
profit and vice-versa. Profit is sources of working capital because it
contributes towards the working capital as a pol by generating more
internal funds.

x) Level of Taxes

The level of taxes also influences working capital requirement of firm.


The amount of taxes to be paid in advances is determined by the
prevailing tax regulations. But the firm’s profit is not constant, or can
note be predetermined. Tax liability in asense of short-term liquidity is
payable in cash. Therefore, the provision for tax amount is one of the
important aspects of working capital planning. If tax liability increase,
it needs to increase the working capital and vice-versa.

4.6) Financing of Working Capital:

The firm’s working capital assets policy is never set in a vacuum; it is


always established in conjunction with the firm’s working capital
policy. Every manufacturing concern of industry requires additional
assets whether they are instable or growing conditions. The most
important function of financial manager is to determine the level of
working capital and to decide how it is to financed. Financial of any
assets is concerned with two major factors- cost and risk. Therefore, the

28
financial manager must determine an appropriate financing mix, or
decide how current liabilities should be used to finance current assets.
However, a number of financing mixes are available to the financial
manager. He can resort generally there kinds of financing.

i) Long-term financing:

Long-term financing has high liquidity and low profitability,


Ordinary share, Debenture, Preference share; retained earnings and
long-term debt of financial institution are major sources of long-
term finance.

ii) Short-term financing:

A firm must arrange its short-term credit in advance. The sources of


short-term financing of working capital are trade credit and bank
borrowing.

Bank credit: Bank credit is the primary institutional sources for


working capital financing for the purpose of bank credit, amount of
working capital requirement has to be estimated by the borrowers
and banks areapproached with the necessary supporting data.

After availability of this data, bank determines the maximum credit


based on the margin requirements of the security. The types of loan
provided by commercial banks are loan arrangement, overdraft
arrangement, commercial paper etc.

4.7) APPROACHES TO MANAGING WORKING CAPITAL

Two approaches are generally followed for the management of working


capital: (i) the conventional approach, and (ii) the operating cycle
approach.

29
The Conventional Approach

This approach implies managing the individual components of working


capital (i.e. inventory, receivables, payables, etc.) efficiently and
economically so that there are neither idle funds nor paucity of funds.
Techniques have been evolved for the management of each of these
components. In India, more emphasis is given to the management of
debtors because they generally constitute the largest share of the
investment in working capital. On the other hand, inventory control has
not yet been practised on a wide scale perhaps due to scarcity of goods
(or commodities) and ever rising prices.

The Operating Cycle Approach

This approach views working capital as a function of the volume of


operating expenses. Under this approach the working capital is
determined by the duration of the operating cycle and the operating
expenses needed for completing the cycle. The duration of the
operating cycle is the number of day involved in the various stages,
commencing with acquisition of raw materials to the realization of
proceeds from debtors. The credit period allowed by creditors will have
to be set off in the process. The optimum level of working capital will
be the requirement of operating expenses for an operating cycle,
calculated on the basis of operating expenses required for a year.

In India, most of the organizations use to follow the conventional


approach earlier, but now the practice is shifting in favour of the
operating cycle approach. The banks usually apply this approach while
granting credit facilities to their clients.

ADEQUACY OF WORKING CAPITAL

30
The firm should maintain a sound working capital position. It should
haveadequate working capital to run its business operations. Both
excessive aswell as inadequate working capital positions are dangerous
from the firms point of view. Excessive working capital not only
impairs the firmsprofitability but also result in production interruptions
and inefficiencies.

The dangers of excessive working capital are as follows:

 It results in unnecessary accumulation of inventories. Thus,


chances of
inventory mishandling, waste, theft and losses increase.
 It is an indication of defective credit policy slack collections
period.
Consequently, higher incidence of bad debts results, which adversely
affects profits.
 Excessive working capital makes management complacent
which
degenerates into managerial inefficiency.
 Tendencies of accumulating inventories tend to make
speculative
profits grow. This may tend to make dividend policy liberal and
difficult
to cope with in future when the firm is unable to make speculative
profits.
Inadequate working capital is also bad and has the following
dangers:

 It stagnates growth. It becomes difficult for the firm to


undertake
profitable projects for non- availability of working capital funds.

31
 It becomes difficult to implement operating plans and achieve
the firm s
profit target.
 Operating inefficiencies creep in when it becomes difficult even
to meet
day commitments.
 Fixed assets are not efficiently utilized for the lack of working
capital
funds. Thus, the firm s profitability would deteriorate.
 Paucity of working capital funds render the firm unable to avail
attractive credit opportunities etc.
 The firm loses its reputation when it is not in a position to
honor its
short-term obligations.
An enlightened management should, therefore, maintain the right
amount of working capital on a continuous basis. Only then a proper
functioning of business operations will be ensured. Sound financial and
statistical techniques, supported by judgment, should be used to predict
the quantum of working capital needed at different time periods.

A firm s net working capital position is not only important as an index


of liquidity but it is also used as a measure of the firm’s risk.
Risk in this regard means chances of the firm being unable to meet its
obligations on due date. The lender considers a positive net working as
a measure of safety. All other things being equal, the more the net
working capital a firm has, the less likely that it will default in meeting
its current financial obligations. Lenders such as commercial banks
insist that the firmshould maintain a minimum net working capital
position.

In this study four years data ( 2008 to 2012 have been presented and
analyzed. It covers to analyze the ratio as well trend and composition

32
of working capital, which means current assets, current liabilities,
liquidity, turnover, leverage and profitability of BALIC.

5.1) Components of current assets:


For the day to day business operation different types of current assets
are required. Current assets refer those assets that are cash or can be
converted into cash within a year. The composition of current assets or
the main components of current assets at BALIC are cash and bank
balance, loan and advances and government securities. Miscellaneous
current assets are also a component of current assets. Prepaid expenses,
outstanding income like interest receivable and other current assets are
also included in miscellaneous current assets. The following table
shows the amount of cash and bank balance, money at call or short
notice, loan and advanced government securities and other current
assets of Bajaj Allianz Life Insurance Company Pvt. Ltd.

Table 1 :
Current Assets

Fiscal Year Sundry Cash and Bank Loan and Other C.A Tota
Debtors balance advance

2008/09 639,948 3,515,993 76,970 1,148,475 5,38

2009/10 1,089,070 2,186,908 130,275 2,022,560 5,29

2010/11 1,341,359 4,285,098 147,078 2,344,020 8,21

2011/12 1,223,706 4,520,165 170,660 3,832,457 9,74

33
Source:- Annual Report of BALIC From 2008/09 to 2012/13

Assets of Company was amounted to Rs. 5,460,356 which


included Rs. 3,552963 of cash and bank balance, Rs. 76,970 of
loan and advance, Rs. 1,828,423 of miscellaneous current assets.
Current assets of the company increase in all four years.

INTERPRETATION 1 :

As stated in above figure the current assets of BALIC increases


all the four year from FY 2008/09 t0 2011/12. In the cash of FY
2009/10, the increasing trend is low from FY 2008/09. But the
overall increasing trend of current assets is higher.

5.2) Component of Current Liabilities:


Current liabilities is a short-term obligation which is payable within a
year. The composition of current liabilities or the main components of
current liabilities. Tax provision, staff bonus, proposed dividend
payable and other liabilities are included in other current liabilities. The
following table shows the amount of deposit and other accounts, short
term loan, bills payable and other current liabilities of BALIC.

Table 2 :

Current Liabilities

34
Fiscal Year Creditors Deposit Bills Payable Other C.L Total
2008/09 2,249,357 3,318,900 87,607 2,396,492 8,052,356

2009/10 3,701,079 4,129,900 196,168 2,491,564 10,518711

2010/11 3,281,079 4,430,900 98,372 1,690,564 9,500,915

2011/12 4,246,449 4,142,491 97,087 2,368,827 10,654,854

In the above table, the component of current liabilities which consists


deposits.Source annual report of company.

INTERPRETATION 2 :

In the above figure shows that the current liabilities of the company is
increasing In fiscal year 2008/09 the total amount of current liabilities
Rs. 8,052,356 for the increasing impact of deposits and other current
liabilities. In all four year deposits and other current liabilities are
increased.

5.3) Working capital of BALIC:

Working capital is required to run business smoothly and efficiently in


the context of set objectives. It is no doubt that no organization can
achieve its goal without proper use of working capital. It means money
invested on working capital should be neither more nor less because
both the position of working capital affects not only liquidity but also
profitability of the organization. The investment decision should be
made on any type of current assets by considering their role in

35
company and determining which one is more beneficial to the company
and which is not. The following table shows the amount of working
capital of BALIC of the study period.

Table 3 :

Working capital of Company

Fiscal Year Total C.A Total C.L WC= CA-CL


2008/09 5,381,386 8,052,356 4,470,970
2009/10 5,298,538 9,500,915 4,202,377
2010/11 8,217,555 10,518,711 2,301,156
2011/12 9,746,988 10,654,854 907,866
Sources: Annual Report of company.

INTERPRETATION3:

In the above figure we clearly show the current assets, current


liabilities and working capital condition of BALIC from fiscal year
2008/09 to 2011/12. Working capital condition of the company is at
satisfactory level. All the year of the study period the working capital
of the company is negative.

 Liquidity Ratio:
Liquidity ratios measures ability of the firms to meet its short-
term obligations. Liquidity of any business organization is

36
directly related with working capital or current assets and
current liabilities of that organization. In other words, one of the
main objectives of working capital management is keeping
sound liquidity position. Company is a different organization
which is engaged in Mobilization of funds. So, without sound
liquidity position of ability to meet its short-term obligation
various liquidity ratios are calculated and to know the trend of
liquidity are trend analysis of major liquidity ratios have been
considered.

5.4) Current Ratio:


This ratio indicates the short-term solvency position of bank. In
other words current ratio indicates better liquidity position. It is
calculated as follows:

Current assets (CA)

Current liabilities (CL)

The following table shows the current ratio to compare the following
capital management of BALIC.

Table 4 :

Current ratio

Fiscal Year Total CA Total CL Current ratio

2008/09 5,381,386 8,052,356 0.67

2009/10 5,298,538 10,518,711 0.50

2010/11 8,217,555 9,500,915 0.86

2011/12 9,746,988 10,654,854 0.91


Average=0.74
Sources: Annual Report of BALIC from 2008/09 to 2012.

37
Current Ratio of BALIC

INTERPRETATION4 :

The above table shows the CA, CL and current ratio of the BALIC. The
current ratio of the BALIC is fluctuating over the year. The highest
current ratio is in fiscal year 2011/12 0.91. And in all year it is
increasing. The average ratio is 0.74.

5.6) Cash and bank balance to Current Assets:

The cash and bank balance is almost liquids from the current assets,
this ratio shows the percentage of readily available fund within the
banks. It can be calculated by dividing cash and bank balance by
current assets, which is given below.

Cash and bank balance

Current assets

This ratio shows that the percentage of current assets cover cash and
bank balance. The following table and figure shows the cash and bank
balance to current assets ratio of BALIC over the study period.

38
Table 5 :

Cash and Bank to Current Assets Ratio of BALIC

Fiscal Year Cash& Bank Current Assets Ratio (%)


Balance
2008/09 3,552,963 5,381,386 0.67

2009/10 2,186,908 5,298,538 0.41

2010/11 4,385,098 8,217,555 0.53

2011/12 4,382.396 9,746,988 0.44

Sources: Annual Report of Company

INTERPRETATION5 :

Cash and Bank balance to current assets ratio of the company is in


2009/10 decreased and in 2010/11 it increased and again in 2011/12 is
decreased.

39
5.7) Cash and Bank Balance to Total deposit:

The ratio shows the ability of bank immediate funds to cover their
deposits. It can be calculated by dividing cash and bank balance by
deposits. The ratio can be expressed as:

The following table and figure shows the cash and bank balance to total
deposits ratio of the BALIC over the study period.

Table 6 :

Cash and Bank balance to total Deposit Ratio of BALIC

Fiscal Year Cash & bank Total deposit Ratio

2008/09 3,552,963 2,318,900 1.53

2009/10 2,186,908 2,123,900 1.03

2010/11 4,385,098 2,899,500 1.51

2011/12 4,382.396 3,857,000 1.14

Sources: Annual report of Company

40
INTERPRETATION6 :

The above figure depicts that the cash and bank balance to total deposit
of BALIC has been slightly decreasing in FY 2009/10, 2010/11,
2011/12.

5.8) Net Profit to Total Assets:

This ratio is very much crucial for measuring the profitability of funds
invested in the bank assets. It measures the return on assets it
computed by using the following formula.

Net profit after tax

Total assets

Table 7

Net Profit to Total assets Ratio of BALIC

Fiscal Year Net Profit Total assets Ratio(%)

2008/09 5,605,846 5,336,042 1.05

2009/10 6,182,978 5,298,538 1.17

41
2010/11 10,387,412 8,217,555 1.26

2011/12 23,499,431 9,746,988 2.41

Sources: Annual Report of company

INTERPRETATION7:

Net Profit to total asset ratio in 2008/09 1.05 and it increasing slightly
in financial year 2009/10, 2010/11 and 2011/12.

5.9) Debtors Turnover Ratio:

Concept: -

Debtors are expected to be converted into cash over a


short period of time and therefore are included in current assets. It
shows how many times debtors are converted into cash in a year.

Debtors Turnover Ratio = Net credit sales

Average Debtors

Table 8 :

Debtors Turnover Ratio

Year Credit sales Average Debtors Ratio

42
2008/09 102,199,181 19,080,194 5.35

2009/10 132,858,985 27,192,101 4.88

2010/11 171,671,451 36,302,837 4.72

2011/12 221,246,824 42,584,634 5.19


Diagram:-

INTERPRETATION8 :

The debtor’s turnover ratio was very less in the year


2010/11 at 4.72 times, but them it has increased to 5.19, 5.66 times in
the year 2011/12 and 2008-09. This shows that the company is making
all the offers to speed up the collection process.

5.9) Creditors Turnover Ratio:

Concept: -

Creditors’ turnover ratio establishes relationship


between not credit purchases and average trade creditors and accounts
payable. The ratio indicates the velocity with which the creditors are
turned over in relation to purchases.

Creditors Turnover Ratio = Net Credit Purchases

Average creditors

43
Table 9 :

Creditors Turnover Ratio

Year Credit Purchases Average Creditors Ratio

2008/09 96,724,469 82,074,994 1.17


2009/10 127,553,879 112,554,635 1.13
2010/11 165,680,148 146,617,013 1.13
2011/12 213,323,185 189,501,666 1.12

INTERPRETATION9 :

The creditors turnover ratio was 1.17 times in the year 2008/09& it
decreased to 1.13 times in the year 2009-2010 but creditor turnover
will be remain same two year 2009/10 and 2011/12.

5.10)Working Capital Turnover Ratio:-


It is taken as one of the
primary indicators of the short-term solvency of the business. It
establishes the relationship with the net sales. It measures the
efficiency with which the working capital is being used by the firm.

WORKING CAPITAL TURNOVER RATIO = Net Sales

Net Working
Capital

44
Table 10 :

Year Net Sales Net Working Capital Ratio


2008/09 102,199,181 20,229,751 5.05
2009/10 132,858,985 23,244,807 5.72
2010/11 171,671,451 36,879,727 4.65
2011/12 221,246,824 32,265,850 6.86
Source: Annual report of BALIC

INTERPRETATION10 :

In The year 2008/09 working capital t/o ratio was5.05 time ,5.72 time
in the year 2009/10. In the year 2009/10 the working capital has
increases. And in financial year 2010/11 it decreased and again in
financial year 2011/12 it increased.

Table 11 :

Statement of changes in working Capital for the year 2009/10

Particulars 31-3-2009 31-3-2010 Increase Decrease

45
Current assets

Sundry debtors 639,948 1,089,070 449,122

Cash& bank balance 3,515,993 2,186,908 1,366,055

Loan& advance 76,970 130,275 53,310

Other C.A 1,148,475 2,022,560 834,085

Total 5,381,386 5,298,538 1,336,517 1,366,055

Current Liabilities

Sundry creditors 2,249,357 3,701,079 1,451,722 -

Deposit 3,318,900 4,129,900 811,000 -

Bills payable 87,607 196,168 108,561 -

Other C.L 2,396,492 2,491,564 95,072 -

Total 8,052,356 10,518,711 2,466,355

INTERPRETATION 11 :

Current assets for the year 2009/10 is increases and it is good condition
for the company and current liabilities of the company is
increased by 2,466,355.and by putting formula (W.C= C.A-
C.L)working capital of the company for year 2009/10 is
4,470,970. Here working capital of company is increasing that
means profitability of company also increasing.

Table 12 :

Statement of changes in working Capital for the year 2m,010/11

46
Particulars 31-3-2010 31-3-2011 Increase Decrease

Current assets

Sundry debtors 1,089,070 1,341,359 298,850

Cash& bank balance 2,186,908 4,285,098 2,198,190

Loan& advance 130,275 147,078 16,803

Other C.A 2,022,560 2,344,020 468,538

Total 5,298,538 8,217,555 2,982,381

Current Liabilities

Sundry creditors 3,701,079 3,281,079 420,000

Deposit 4,129,900 4,430,900 301,000

Bills Payable 196,168 98,372 97,796

Other C.L 2,491,564 1,690,564 801,000

Total 10,518,711 9,500,915 301,000 1,318,796

INTERPRETATION12 :

Current assets for the year 2009/10 is increases and it is good condition
for the company and current liabilities of the company is decreased by
1,017,796 that’s shows the working capital of the company is
increased. Here debtors increased means cash balance of company
decreased.

47
Table 13 :

Statement of changes in working Capital for the year 2011/12

Particulars 31-3-2011 31-3-2012 Increase Decrease

Current assets

Sundry debtors 1,341,359 1,223,706 117,653

Cash& bank balance 4,285,098 4,520,165 235,067

Loan& advance 147,078 170,660 23,582

Other C.A 2,344,020 3,832,457 1,488,437

Total 8,217,555 9,746,988 1,747,086 117,653

Current liabilities

Sundry creditors 3,281,079 4,246,449 765,370

Deposit 4,430,900 4,142,491 - 288,409

Bills payable 98,372 97,087 1,285

Other C.L 1,690,564 2,368,827 678,263

Total 9,500,915 10,654,854 1,443,633 289,694

INTERPRETATION13 :

Current assets for the year 2009/10 is increases and it is good condition
for the company and current liabilities of the company is increased by
1,153,939 that’s shows working capital of company decreased. Here
debtors decreased that’s good for company it shows cash of company
increased.

48
FINDINGS
1. Current assets for the year 2009/10 is decreases and its
application for the company and current liabilities of the
company is increased by 2,466,355.and by putting formula
(W.C= C.A- C.L)working capital of the company for year
2009/10 is 4,470,970.

2. Current assets for the year 2009/10 is increases and it is good


condition for the company and current liabilities of the
company is decreased by 1,017,796 that’s shows the working
capital of the company is increased. Here debtors increased
means cash balance of company decreased.

3. Current assets for the year 2009/10 is increases and it is good


condition for the company and current liabilities of the
company is increased by 1,153,939 that’s shows working
capital of company decreased. Here debtors decreased that’s
good for company it shows cash of company increased.

4. Current ratio (C.R) of fiscal year 2008/09 to 2011/12 showed


slightly increase i.e. 0.67 to 0.91. But in fiscal year 2009/10
C.R decreased comparatively in deposits and in fiscal year
2010/11 C.R is again increase 0.86 due to increase in factors
which influence it.

5. Cash and Bank balance to current assets ratio of the company is


in 2009/10 decreased and in 2010/11 it increased and again in
2011/12 is decreased.

6. The above figure depicts that the cash and bank balance to total
deposit of BALIC has been slightly decreasing in FY 2009/10,
2010/11, 2011/12.

7. Net profit to total asset ratio in 2008/09 1.05 and it increasing


slightly in financial year 2009/10, 2010/11 and 2011/12.

8. The debtor’s turnover ratio was very less in the year 2010/11 at
4.72 times, but them it has increased to 5.19, 5.66 times in the
year 2011/12 and 2008-09. This shows that the company is
making all the offers to speed up the collection process.
9. The creditors turnover ratio was 1.17 times in the year
2008/09& decreased to 1.13 times in the year 2009-2010 but

49
creditor turnover will be remain same two year 2009/10 and
2011/12.

10. In The year 2008/09 working capital t/o ratio was5.05 time ,
5.72 time in the year 2009/10. In the year 2009/10 the working
capital has increases. And in financial year 2010/11 decreased
and again in financial year 2011/12 increased.

SUGGESTION
On the basis of the analysis and observation an attempt made to
present some suggestions.

1. In the year 2009-2010 the current assets of the company has


declined and current liability of the company has increases
therefore the net working capital declined. There for the current
ratio has declined. The net working capital of the company has
increased remaining year.

2. The company has able to repay the liability of the creditors


because the profit of the company has increased every year.

3. Because of the current assets has declined in the year 2010-


2011 but profit of the company has increased in the year 2008-
2009. There for the return on current assets is high.

4. Company has able to full fill the standard level of current ratio
i.e. 2:1 .There for the company has able to repay the liability
and loan of company.

50
CONCLUSION
At the end it is stated that the working capital management is a part of
money invested in the business.Working capital may be regarded as
lifeblood of a business. Its effective provision can do much to ensure
the success of a business.

The Working Capital Management contributes much in the over all


management of the organization affairs, efficiency of organization
operations depend on how it manages its short term business dealings.
Working Capital management contributes for the firm efficiency as
well as the finance manager is proper utilizing the available wealth and
maintaining the required liquidity.

Working capital is considered to be an important tool for


progress. Working capital management techniques are playing
significant role in assisting the management for decision making. The
study of working capital management at Bajaj Allianz Life Insurance
Pvt. Ltd.Is found to be very effective. The working capital contains the
management of Cash, Debtors, and creditors. The Bajaj Allianz Life
Insurance Pvt. Ltd has profit oriented company .The profit of the
company will be increases every year .The company has able to the
repay the amount of the creditor. The company has more working
capital and also sale has increases year to year.

51
LIMITATIONS
1. The analysis is limited to three years of data study (for the year
2008/09 to 2011/12 ) for financial analysis.

2. The estimation and expectation made in the financial statements


may differ from actual performance due to various economic
conditions, government policies and other related factors.
3. All the data accumulated and presented in this project is procured
from secondary sources which may have been subject to stealthy
biased nature.

52