A STUDY ON

WORKING CAPITAL MANAGEMENT

With reference to PEARL BOTTLING PVT. LTD.
Madhurawada, Visakhapatnam
for the award of Degree of
MASTER OF BUSINESS ADMINISTRATION

By
K. SAI SUDHAKAR
Student of SANKETIKA VIDYA PARISAD ENGINEERING
COLLEGE
Regd. No.115232902050
 INTRODUCTION
 Definition : Working capital management refers to a company's
managerial accounting strategy designed to monitor and utilize the two
components of working capital, Current assets and Current liabilities, to
ensure the most financially efficient operation of the company.

 Funds required for short term purposes or for meeting day to day expenses
of business are called working capital.

 It is a short term finance which is used to invest in current assets.

 It is also called Revolving capital or Rotating capital or Short term capital.

 OBJECTIVES OF THE STUDY
i. To study growth and development of Pearl Bottling Pvt. Ltd.

ii. To know working capital practices of the firm.

iii.To analyze Cash management ,Inventory management and Receivable

management procedures of the firm.

iv. To analyze the overall liquidity position of Pearl Bottling Pvt. Ltd.
 
v. To identify the problem areas of organization and basing on which
necessary suggestions can be rendered.
 
 
 
 NEED FOR THE STUDY
1. Management of funds, particularly working capital decides not only
liquidity and solvency but also operating efficiency of the organization.
 
2. Pearl Bottling (P) Ltd is a fastest growing liquid beverage company, so it
needs more working capital and its management has to keep the pace of
its financial growth.
 
3. Strengths of the organization in managing working capital of the
organization.
 
4. To review the elements of working capital and its importance in
operating activities in the organization.
 SCOPE OF THE STUDY
 
•The study covers Working Capital Management of Pearl Bottling Pvt. Ltd. and its
importance to the company especially relating to inventory, debtors, and cash.
 
•The scope of this study is limited to the Visakhapatnam franchise of Pearl Bottling Pvt.
Ltd. Only.
 
•The figures relating to this study is extracted from the financial statement of the Pearl
Bottling company.
 
•The comparative statements are prepared based on the information given by the
financial department of the company.
 
 RESEARCH METHODOLOGY
Primary Data:

The employees and manager of the financial
department have provided the information needed for
the study.

Secondary Data:
Data Gathered from the Balance sheets, Profit and
loss accounts, Annual reports and other Books and
Manuals of the PEARL BOTTLING PRIVATE
LIMITED.
 LIMITATIONS OF THE STUDY
1. The project is only for 60 days
2. Restricted to financial department only
3. Analysis is done only for past 5 years
4. The study depends upon the information
given by company.
COMPONENTS OF WORKING CAPITAL

Current assets:
These are those assets which converts into cash within one year.
These includes
• Inventory
• Debtors
• Bills Receivables
• Cash and Bank balances
• Prepaid expenses
COMPONENTS OF WORKING CAPITAL

Current liabilities:
These are those liabilities which are to be paid within one year.
These includes
• Creditors
• Bills payable
• Bank overdraft
• Proposed dividend
• Provision for taxation
WORKING CAPITAL CYCLE

Raw material

Cash Work-in-
progress

Debtors & Finished

B/R goods

sales
CALCULATION OF DURATION OF
OPERATING CYCLE
DURATION OF RAW MATERIAL STORAGE
+
DURATION OF WORK IN PROGRESS
+
DURATION OF FINISHED GOODS
+
DURATION OF RECEIVABLES FROM DEBTORS
-
DURATION OF CREDIT PERIOD ALLOWED BY THE
SUPPLIERS

O =R+W+F+D-C
TYPES OF WORKING CAPITAL

TYPES OF WORKING CAPITAL

BASIS OF CONCEPT BASIS OF NATURE

VARIABLE WORKING CAPITAL

GROSS WORKING CAPITAL NET WORKING CAPITAL FIXED WORKING CAPITAL
SEASONAL SPECULATIVE PRECAUTIONARY
 SOURCES OF WORKING CAPITAL

SOURCES OF WORKING CAPITAL

LONG TERM SOURCES SHORT TERM SOURCES

OWNED SOURCES BORROWED SOURCES INTERNAL SOURCES EXTERNAL SOURCES

ISSUE OF SHARES DEBENTURES DEPRECIATION FUNDS ADVANCE FROM CUSTOMERS

 TECHNIQUES OF ANALYSING
WORKING CAPITAL
The analysis can be conducted through using
following tools.
 Fund flow analysis
 Working capital budgeting
 Ratio analysis
FUNDFLOW ANALYSIS:
 it is an effective tool to be used to identify the sources from which we
can get the funds and also in which we apply those resources.
 it is used to estimate changes in financial position of a firm.
WORKING CAPITAL BUDGETING:
 it is prepared to estimate the future long term and short term working
capital needs and sources of finance them.
 the main objective of preparing this budget is to availability of funds
as and when needed and effective utilization of resources.
RATIO ANALYSIS:
 A ratio is a simple arithmetic expression of relationship of one
number to another number.
 This technique is used to measure short term liquidity or working
capital position of a firm.
 INDUSTRY PROFILE
o Caleb bradham was invented Pepsi drink in 1898 called it as
BRAD’S DRINK After 1901 it was renamed as Pepsi Cola.
o Categories of soft drinks:
 Carbonated soft drinks
 Non carbonated soft drinks
o Soft drinks in India witnessed slightly lower value growth in
2015.
o Soft drinks has become world’s leading beverages sector.
o Global consumption of soft drinks increases by 5% a year well
ahead of all other beverages.
o Unites states is the world’s biggest soft drink market.
o Pepsi and coke are market leaders at present in soft drinks.
 COMPANY PROFILE
 Business type: Soft drink manufacturer
 C.E.O. : Sameer kaiwar
 Company name: Pearl Bottling Pvt. Ltd.
 Address: D.No4-7, Madhurawada,
Visakhapatnam - 530041, Durga nagar.
 Ph no: 9010202504
 Establishment year: 1995
 Annual sales: 150.37 crores in 2015-16
 No. of employees: 263
 Logo of company:
The products manufactured by PEARL BOTTLING PVT. LTD.

 Pepsi (Cola flavour)

 7 up (Lemon flavour)
 7 up Revive (Energy drink)
 Mountain dew (Lemon flavour)
 Mirinda (Orange flavour)
 Slice (Mango flavour)
 Aquafina (Purified water)
 Lehar (soda)
 MANUAFATURING IN PEARL
BOTTLING PVT. LTD.
The process of manufacturing soft drinks is
mainly divided into 4 parts. They are:

1.Syrup making
2.Water treatment
3.Bottling
4.Crating
ANALYSIS OF WORKING CAPITAL

working capital trend in last 5 years

0
-5
-10
-15
-14.92
Rs. in Crores
-20 -19.19
-17.54
-25
-30
-30.17
-35
-40
-40.07
-45
2011-12 2012-13 2013-14years
2014-15 2015-16
 INTERPRETATION
 


There is a negative working capital trend in last 5 years.

The inventories are contributing more to the current assets.

The liquidity position of company is very weak.

The company is taking more loans from banks that causes higher current
liabilities than current assets.

The company has least negative working capital in F.Y. 2012-13 and the
company faced poor management of working capital in F.Y. 2015-16.
 FINDINGS
 

I. The short term borrowings are in increasing trend.

II. There is a negative working capital in last 5 years.
III. The sales of the company increased from the year 2012-
13 and till now it is in the growing trend.
IV. The company took 90 days on an average to make
payments to the Creditors.
V. The company took 20 days on an average to collect the
cash from the Debtors.
VI. The inventory is cleared for every 4 months on an
average.
 SUGGESTIONS
  It must try to reduce the bad debts, losses and to reduce the
debtor’s collection time.
  It is better to maintain the inventories at optimum level.
 The company has to maintain the cash and bank balances in a
consistent and flexible manner to meet the contingencies in
the future.
 Payment to the Creditors within the time limit.
 It should improve the Current Assets and decrease the Current
Liabilities to get higher net working capital.
 It should improve the rotation of Working Capital Cycle.