A

SUMMER TRAINNING PROJECT REPORT

ON

WORKING CAPITAL MANAGEMENT IN

VENTURE CAPITAL MANAGEMENT

Submitted for the partially fulfilment of degree of

MASTER OF BUSINESS ADMINISTRATION

Submitted To : Submitted By:

ME.SANJAY MISHRA VIKASH SINGH
DEPT. OF BUSINESS ADMINISTRATION M.B.A. (gENERAL) 3 SEM
M.J.P.R.U., BAREILLY

DEPARTMENT OF BUSINESS ADMINISTRATION

MAHATMA JYOTIBA PHULE ROHILKHAND
UNIVERSITY, BAREILLY

1
 DECLARATION

I SUMIT KUMAR SHAHI student of MBA (Marketing) Semester 3 of

M.J.P. Rohilkhand University, Bareilly hereby declare that the work of
studying about “MARKETING AWARENESS OF PAYTM” presented in the
form of this report is done by my own efforts and is genuine to the best of
knowledge and is not submitted in any other university/institution towards the
award of any other degree. An attempt has been made by me to provide all
relevant and important details regarding the topic to support the theoretical
advice with concrete research evidence. This will be helpful to clean the for
surrounding the various aspect of the topic. I hope that this project report will be
beneficial.

VIKASH SINGH
M.B.A. (General)
Semester 3th
M.J.P. Rohilkhand University,
Bareilly

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 ACKNOWLEDGEMENT
The successful completion of the has been accomplished with the valuable
guidance and support of numerous people. I owe to their constructive support,
which sustained my motivation. I take this opportunity to express my profound
sense of gratitude to all of them.

I express my sincere gratitude to Mr. Sanjay Mishra

M.J.P ROHILKHAND UNIVERSITY for his invaluable support during my
MBA Course.

I express my sincere thanks and heartfelt gratitude to

M.J.P.R.U Bareilly for her excellent and inspiring guidance and suggestions
throughout this project work. Without her inspiring encouragement, it would
have not been possible for me to bring out this project.
I express my splendid thanks to all my lecturers, librarian for extending library
facilities needed to complete this project.
Last but not least, my sincere thanks to everybody who has helped me directly
or indirectly for making this project report a grand success.

VIKASH SINGH

MBA III SEM. (GENERAL)

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 TABLE OF CONTENT

 INTRODUCTION

 UNDERSTANDING VENTURE CAPITAL

 ADVANTAGES AND DISADVANTAGES OF VENTURE

CAPITAL

 WORKING CAPITAL

 RESEARCH METHODOLOGY

 THEORY OF WORKING CAPITAL

 PRINCIPLES OF WORKING CAPITAL MANAGEMENT

ASSESMENT OF WORKING CAPITAL
 DATA ANALYSIS

 RATIO ANALYSIS
 CURRENT SCENERIO INTERPRETATION

 CONCLUSION

 BIBLOGRAPHY

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 INTRODUCTION

Venture capital (VC) is a form of private equity and a type of financing that

investors provide to startup companies and small businesses that are believed to

have long-term growth potential. Venture capital generally comes from well-

off investors, investment banks, and any other financial institutions.

However, it does not always take a monetary form; it can also be provided in

the form of technical or managerial expertise. Venture capital is typically

allocated to small companies with exceptional growth potential, or to

companies that have grown quickly and appear poised to continue to expand.

Though it can be risky for investors who put up funds, the potential for above-

average returns is an attractive payoff. For new companies or ventures that

have a limited operating history (under two years), venture capital is

increasingly becoming a popular—even essential—source for raising money,

especially if they lack access to capital markets, bank loans, or other debt

instruments. The main downside is that the investors usually get equity in the

company, and, thus, a say in company decisions.

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 Venture capital financing is funding provided to companies and

entrepreneurs. It can be provided at different stages of their evolution,

although it often involves early and seed round funding.

 Venture capital funds manage pooled investments in high-growth

opportunities in startups and other early-stage firms and are typically

only open to accredited investors.

 Venture capital has evolved from a niche activity at the end of the

Second World War into a sophisticated industry with multiple players

that play an important role in spurring innovation.

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 UNDERSTANDING VENTURE CAPITAL

 In a venture capital deal, large ownership chunks of a company are

created and sold to a few investors through independent limited

partnerships that are established by venture capital firms. Sometimes

these partnerships consist of a pool of several similar enterprises.

 One important difference between venture capital and other private

equity deals, however, is that venture capital tends to focus on emerging

companies seeking substantial funds for the first time, while private

equity tends to fund larger, more established companies that are seeking

an equity infusion or a chance for company founders to transfer some of

their ownership stakes.

 History of Venture Capital

 Venture capital is a subset of private equity (PE). While the roots of PE

can be traced back to the 19th century, venture capital only developed as

an industry after the Second World War.

 Harvard Business School professor Georges Doriot is generally

considered the "Father of Venture Capital." He started the American

Research and Development Corporation (ARD) in 1946 and raised a

$3.5 million fund to invest in companies that commercialized

technologies developed during WWII. ARDC's first investment was in a

company that had ambitions to use x-ray technology for cancer

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 treatment. The $200,000 that Doriot invested turned into $1.8 million

when the company went public in 1955.1

 Hit From the 2008 Financial Crisis

 The 2008 financial crisis was a hit to the venture capital industry

because institutional investors, who had become an important source of

funds, tightened their purse strings. The emergence of unicorns, or

startups that are valued at more than a billion dollars, has attracted a

diverse set of players to the industry. Sovereign funds and notable

private equity firms have joined the hordes of investors seeking return

multiples in a low-interest-rate environment and participated in large

ticket deals. Their entry has resulted in changes to the venture capital

ecosystem.

 Westward Expansion

 Although it was mainly funded by banks located in the Northeast,

venture capital became concentrated on the West Coast after the growth

of the tech ecosystem. Fairchild Semiconductor, which was started by

eight engineers (the "traitorous eight") from William Shockley's

Semiconductor Laboratory, is generally considered the first technology

company to receive VC funding. It was funded by east coast industrialist

Sherman Fairchild of Fairchild Camera & Instrument Corp.

 Arthur Rock, an investment banker at Hayden, Stone & Co. in New

York City, helped facilitate that deal and subsequently started one of the

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 first VC firms in Silicon Valley. Davis & Rock funded some of the most

influential technology companies, including Intel and Apple.2 By 1992,

48% of all investment dollars went into West Coast companies;

Northeast Coast industries accounted for just 20%.3

 According to Pitchbook and National Venture Capital Association

(NVCA), the situation has not changed much. During the fourth quarter

of 2021, West Coast companies accounted for more than one-third of all

deals (but more than 60% of deal value) while the Mid-Atlantic region

saw just around one-fifth of all deals (and approximately 20% of all deal

value).4

 In the fourth quarter of 2021, though, much of the action shifted to the

Midwest: The value of deals rose 265% in Denver and 331% in

Chicago. While the number of West Coast deals is waning, the San

Francisco Bay Area still dominates the VC world with 630 deals worth

$25 billion.

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 ADVANTAGES AND DISADVANTAGES OF

VENTURE CAPITAL

Venture capital provides funding to new businesses that do not have access to

stock markets and do not have enough cash flow to take debts. This

arrangement can be mutually beneficial: businesses get the capital they need to

bootstrap their operations, and investors gain equity in promising companies.

There are also other benefits to a VC investment. In addition to investment

capital, VCs often provide mentoring services to help new companies establish

themselves, and provide networking services to help them find talent and

advisors. A strong VC backing can be leveraged into further investments.

On the other hand, a business that accepts VC support can lose creative control

control over its future direction. VC investors are likely to demand a large

share of company equity, and they may start making demands of the

company's management as well. Many VCs are only seeking to make a fast,

high-return payoff and may pressure the company for a quick exit.

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 INTRODUCTION OF WORKING CAPITAL

The net working capital of business is its current assets less its current

liabilities.

Current Assets include:

 Stock of Raw Material

 Work in Progress

 Finished Goods

 Trade Debtors

 Prepayments

 Cash Balances

Current Liabilities include:

 Trade Creditors

 Accruals

 Taxation Payable

 Dividends Payable

 Short term Loans

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Every business needs adequate liquid resources in order to maintain day to day

cash flows. It needs enough cash to by wages and salaries as they fall due and

to pay creditors if it is to keep its workforce and ensure its supplies.

Maintaining adequate working capital; is not just important in the short term.

Sufficient liquidity must be maintained in order to ensure the survival of

business in the long term as well. Even a profitable business may fail if it does

not have adequate cash flows to meet its liabilities as they fall a due. Therefore

when business make investment decisions they must not only consider the

financial outlay involved with acquiring the new machine or the new building

etc, but must also take account of the additional current assets that are usually

involved with any expansion of activity .

Increase production tends to engender a need to hold additional stocks of raw

material & work in progress.

Increased sales usually mean that the level of debtor will increase. A general

increase in the firm’s scales of operation tends to imply a need for greater

level of cash.

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 RESEARCH METHODOLOGY

STATEMENT OF PROJECT

 Evaluation, analysis & interpretation of working capital management of

United Engineering Services.

 Suggesting ways to improve its working capital utilization.

OBJECTIVE OF RESEARCH

 Estimation of working capital requirement

 Evaluation of working capital management

 Evaluation of Liquidity position & working capital utilization

 Analysis of relationship between working capital and profitability

 Analysis & sources of working capital

 Analyzing the level of current assets with relation to current liabilities.

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COLLECTION OF DATA:

 Data has been collected from various sources like:

 Annual reports of last three years

 Manual of concerned departments

 Consultants and personnel of United Engineering Services.

METHODS OF QUANTATIVE ANALYSIS

 Calculation of net working capital requirements.

 Ratio analysis

 Operating cycle & cash cycle

 Cash flow analysis

 Determining the Financing mix

 Statistical tools like graphical presentation

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ASSUMPTIONS

 Year is taken of 365 days

 All purchases have been taken as credit purchases and all sales have been

taken as credit sales.

 In the absence of relevant data the data from internet site is taken as the

relevant information.

LIMITATIONS

 The data is mostly secondary in nature

 Data has been recalculated & regrouped wherever necessary

 In the absence of sufficient data personnel judgment have been taken on

reasonable assumption.

 In the absence of sufficient data in-depth study of cash, Receivables and

inventory management was not possible.

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 THEORY OF WORKING CAPITAL

MEANING OF WORKING CAPITAL:

Capital required for a business can be classifies under two main categories:

 Fixed Capital

 Working Capital

Every business needs funds for two purposes for its establishments and to carry

out day to day operations. Long term funds are required to create production

facilities through purchase of fixed assets such as plant and machinery, land and

building, furniture etc. Investments in these assets are representing that part of

firm’s capital which is blocked on a permanent or fixed basis and is called fixed

capital. Funds are also needed for short term purposes for the purchasing of raw

materials, payments of wages and other day to day expenses etc. These funds

are known as working capital. In simple words, Working capital refers to that

part of the firm’s capital which is required for financing short term or current

assets such as cash, marketable securities, debtors and inventories.

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CONCEPTS OF WORKING CAPITAL:

There are two concepts of working capital:

 Balance Sheet concepts

 Operating Cycle or circular flow concept

BALANCE SHEET CONCEPT:

There are two interpretation of working capital under the balance sheet concept:

 Gross Working Capital

 Net Working Capital

The term working capital refers to the Gross working capital and represents the

amount of funds invested in current assets . Thus, the gross working capital is

the capital invested in total current assets of the enterprises. Current assets are

those assets which are converted into cash within short periods of normally one

accounting year. Example of current assets is:

Constituents of Current Assets:

 Cash in hand and Bank balance

 Bills Receivable

 Sundry Debtors

 Short term Loans and Advances

 Inventories of Stock as:

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  Raw Materials

 Work in Process

 Stores and Spaces

 Finished Goods

 Temporary Investments of Surplus Funds

 Prepaid Expenses

 Accrued Incomes

The term working capital refers to the net working capital. Net working capital

is the excess of current assets over current liabilities or say:

Net Working Capital = Current Assets – Current Liabilities.

NET WORKING CAPITAL MAY BE NEGATIVE OR POSITIVE:

When the current assets exceed the current liabilities, the working capital is

positive and the negative working capital results when the current liabilities are

more than the current assets. Current liabilities are those liabilities which are

intended to be paid in the ordinary course of business within a short period of

normally one accounting year of the current assets or the income of the

business. Examples of current liabilities are:

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CONSTITUENTS OF CURRENT LIBILITIES:

 Bills Payable

 Sundry Creditors or Account Payable

 Accrued or Outstanding Expenses

 Short term Loans, Advances and Deposits

 Dividends Payable

 Bank Overdraft

 Provision for Taxation, If does not amount to appropriation of profits

The gross working capital concept is financial or going concern concept

whereas net working capital is an accounting concept of working capital.

OPERATING CYCLE OR CIRCULATING CASH FORMAT:

Working Capital refers to that part of firm’s capital which is required

for financing short term or current assets such as cash, marketable

securities, debtors and inventories. Funds thus invested in current

assets keep revolving fast and being constantly converted into cash

and these cash flows out again in exchange for other current assets.

Hence it is also known as revolving or circulating capital. The circular

flow concept of working capital is based upon this operating or

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working capital cycle of a firm. The cycle starts with the purchase of

raw material and other resources

And ends with the realization of cash from the sales of finished goods.

It involves purchase of raw material and stores, its conversion into

stocks of finished goods through work in progress with progressive

increment of labor and service cost, conversion of finished stocks into

sales, debtors and receivables and ultimately realization of cash and

this cycle continuous again from cash to purchase of raw materials

and so on. The speed/ time of duration required to complete one cycle

determines the requirements of working capital longer the period of

cycle, larger is the requirement of working capital.

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Receivable conversion period Raw material storage

(RCP) conversion period (RMSCP)

Cash received form

Debtors and paid to suppliers

Of raw materials

Sales of finished Raw materials

Goods introduced into process

Finished Goods

Produced

Finished goods conversion Work in process

Period (FGCP) Conversion period

(WIPCP)

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 The gross operating cycle of a firm is equal to the length of the inventories and

receivables conversion periods. Thus,

Gross Operating Cycle = RMCP + WIPCP + FGCP + RCP

Where,

RMCP = Raw Material Conversion Period

WIPCP = Work –in- Process Conversion Period

FGCP = Finished Goods Conversion Period

RCP = Receivables Conversion Period

However, a firm may acquire some resources on credit and thus defer payments

for certain period. In that case, net operating cycle period can be calculated as

below:

Net Operating Cycle Period = Gross Operating Cycle Period – Payable Deferral period

Further, following formula can be used to determine the conversion periods.

 Raw Material Conversion Period = Average Stock of Raw Material.

Raw Material Consumption per day

 Work in process Conversion Period = Average Stock of Work-in-Progress

Total Cost of Production per day

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 Finished Goods Conversion Period = Average Stock of Finished Goods

Total Cost of Goods sold per day

 Receivables Conversion Period = Average Accounts Receivables

Net Credit Sales per day

 Payable Deferral Period = Average Payable

Net Credit Purchase per day

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 CLASSIFICATION OR KIND OF WORKING CAPITAL:

Working capital may be classified in two ways:

 On the basis of concept

 On the basis of time

Om the basis of concept, working capital is classified as gross working

capital and net working capital. The classification is important from the

point of view of the financial manager.

On the basis of time, working capital may be classified as:

 Permanent or Fixed working capital

 Temporary or Variable working capital.

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 Kinds of Working Capital

On the basis of concept On the basis of time

Permanent or
Fixed Working Temporary or
Gross Working Net Working
Capital Capital
Variable Working
Capital t

Regular Reserve Working Special Working

Working Capital Capital Seasonal Working Capital

Capital

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1. PERMANENT OR FIXED WORKING CAPITAL:

Permanent or fixed working capital is the minimum amount which is required to

ensure effective utilization of fixed facilities and for maintaining the circulation

of current assets. There is always a minimum level of current assets which is

continuously required by the enterprises to carry out its normal business

operations.

2. TEMPRORAY OR VARIABLE WORKING CAPITAL:

Temporary or variable working capital is the amount of working capital which

is required to meet the seasonal demands and some special exigencies.Varibles

working capital can be further classified as second working capital and special

working capital. The capital required to meet the seasonal needs of the

enterprises is called the seasonal working capital.

Temporary working capital differs from permanent working capital in the sense

that is required for short periods and cannot be permanently employed gainfully

in the business

IMPORATNCE OR ADVANTAGE OF ADEQUATE WORKING

CAPITAL:

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Working capital is the life blood and nerve centre of a business . just a

circulation of a blood is essential in the human body for maintaining life,

working capital is very essential to maintain the smooth running of a business.

No business can run successfully without an adequate amount of working

capital. The main advantages of maintaining adequate amount of working

capital are as follows:

 Solvency of the Business

 Goodwill

 Easy Loans

 Cash discounts

 Regular supply of Raw Materials

 Regular payments of salaries, wages & other day to day commitments.

 Exploitation of favorable market conditions

 Ability of crisis

 Quick and regular return on investments

 High morals

THE NEED OR OBJECTS OF WORKING CAPITAL:

The need for working capital cannot be emphasized. Every business needs some

amount of working capital. The need of working capital arises due to the time

gap between production and realization of cash from sales. There is an

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operating cycle involved in the sales and realization of cash. There are time

gaps in purchase of raw materials and production, production and sales,

And sales, and realization of cash, thus , working capital is needed for the

following purposes:

 For the purchase of raw materials , components and spaces

 To pay wages and salaries

 To incur day to day expenses and overhead costs such as fuel, power and

office expenses etc.

 To meet the selling costs as packing, advertising etc.

 To provide credit facilities to the customers.

 To maintain the inventories of raw materials, work –in- progress, stores

and spares and finished stock.

FACTORS DETERMING THE WORKING CAPITAL REQUIRMENT:

The working capital requirements of a concern depend upon a large number of

factors such as nature and size of the business, the characteristics of their

operations, the length of production cycle , the rate of stock turnover and the

state of economic situation. However the following are the important factors

generally influencing the working capital requirements.

 NATURE OR CHARACTERSTICS OF A BUSINESS : The nature

and the working capital requirement of enterprises are interlinked. While

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 a manufacturing industry has a long cycle of operation of the working

capital, the same would be short in an enterprises involve in providing

services. The amount required also varies as per the nature, an enterprises

involved in production would required more working capital then a

service sector enterprise.

 MANAFACTURE PRODUCTION POLICY: Each enterprises in the

manufacturing sector has its own production policy, some follow the

policy of uniform production even if the demand varies from time to time

and other may follow the principles of demand based production in which

production is based on the demand during the particular phase of time.

Accordingly the working capital requirements vary for both of them.

 OPERATIONS: The requirement of working capital fluctuates for

seasonal business. The working capital needs of such business may

increase considerably during the busy season and decrease during the

 MARKET CONDITION: If there is a high competition in the chosen

project category then one shall need to offer sops like credit, immediate

delivery of goods etc for which the working capital requirement will be

high. Otherwise if there is no competition or less competition in the

market then the working capital requirements will be low.

 AVABILITY OF RAW MATERIAL: If raw material is readily

available then one need not maintain a large stock of the same thereby

reducing the working capital investment in the raw material stock . On

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 other hand if raw material is not readily available then a large inventory

stocks need to be maintained, there by calling for substantial investment

in the same.

 GROWTH AND EXAPNSION: Growth and Expansions in the volume

of business result in enhancement of the working capital requirements. As

business growth and expands it needs a larger amount of the working

capital. Normally the needs for increased working capital funds processed

growth in business activities.

 PRICE LEVEL CHANGES : Generally raising price level require a

higher investment in the working capital. With increasing prices, the

same levels of current assets needs enhanced investments.

 MANAFACTURING CYCLE: The manufacturing cycle starts with the

purchase of raw material and is completed with the production of finished

goods. If the manufacturing cycle involves a longer period the need for

working capital would be more. At time business needs to estimate the

requirement of working capital in advance for proper control and

management. The factors discussed above influence the quantum of

working capital in the business. The assessment of the working capital

requirement is made keeping this factor in view. Each constituents of the

working capital retains it form for a certain period and that holding period

is determined by the factors discussed above. So for correct assessment of

the working capital requirement the duration at various stages of the

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 working capital cycle is estimated. Thereafter proper value is assigned to

the respective current assets, depending on its level of completion. The

basis for assigning value to each component is given below:

COMPONENTS OF WORKING CAPITAL BASIS OF VALUATION

Stock of Raw Material Purchase of Raw Material

Stock of Work -in- Process At cost of Market value which is lower

Stock of finished Goods Cost of Production

Debtors Cost of Sales or Sales Value

Cah Working Expenses

Each constituent of the working capital is valued on the basis of valuation

Enumerated above for the holding period estimated. The total of all such

valuation becomes the total estimated working capital requirement.

The assessment of the working capital should be accurate even in the case

of small and micro enterprises where business operation is not very large. We

know that working capital has a very close relationship with day-to-day

operations of a business. Negligence in proper assessment of the working

capital, therefore, can affect the day-to-day operations severely. It may lead to

cash crisis and ultimately to liquidation. An inaccurate assessment of the

working capital may cause either under-assessment or over-assessment of the

working capital and both of them are dangerous.

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 PRINCIPLES OF WORKING CAPITAL MANAGEMENT POLICY:

The following are the general principles of a sound working capital

management policy:

PRINCIPLES OF WORKING CAPITAL MANAGEMNT POLICY

PRINCIPLES OF PRINCIPLES OF PRINCIPLES OF PRINCIPLES OF

MATURITY OF
RISK COST OF EQUITY PAYMENTS

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 PRINCIPLE OF RISK VARAITAION (CURRENT ASSETS

POLICY)

Risk here refers to the inability of a firm to meet its obligations as and when

they become due for payment. Larger investment in current Assets with less

dependence on short term borrowings, increase liquidity, reduces risk and

thereby decreases the opportunity for gain or loss. On the other hand less

investments in current assets with greater dependence on short term borrowings,

reduces liquidity and increase profitability. In other words there is a definite

inverse relationship between the degree of risk and profitability. In other words,

there is a definite inverse relationship between the risk and profitability. A

conservative management prefers to minimize risk by maintaining a higher level

of current assets or working capital while a liberal management assumes greater

risk by reducing working capital. However, the goal of management should be

to establish a suitable trade off between profitability and risk.

2. PRINCIPLES OF COST OF CAPITAL: The various source of raising

working capital finance have different cost of capital and the degree of risk

involved. Generally, higher and risk however the risk lower is the cost and

lower the risk higher is the cost. A sound working capital management should

always try to achieve a proper balance between these two.

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3.PRINCIPLE OF EQUITY POSITION: The principle is concerned with

planning the total investments in current assets. According to this principle, the

amount of working capital invested in each component should be adequately

justified by a firm’s equity position. Every rupee invested in current assets

should contribute to the net worth of the firm. The level of current assets may be

measured with the help of two ratios:

1. Current assets as a percentage of total assets and

2. Current assets as a percentage of total sales

While deciding about the composition of current assets, the financial manager

may consider the relevant industrial averages.

4. PRINCIPLES OF MATURITY OF PAYMENT: The principle is

concerned with planning the source of finance for working capital. According to

the principles, a firm should make every effort to relate maturities of payment to

its flow of internally generated funds. Maturity pattern of various current

obligations is an important factor in risk assumptions and risk assessments.

Generally shorter the maturity schedule of current liabilities in relation to

expected cash inflows, the greater the inability to meet its obligations in time.

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 CONSEQUENCES OF UNDER ASSESMENT OF WORKING

CAPITAL

 Growth may be stunted. It may become difficult for the enterprises to

undertake profitable projects due to non availability of working capital.

 Implementations of operating plans may brome difficult and consequently

the profit goals may not be achieved.

 Cash crisis may emerge due to paucity of working funds.

 Optimum capacity utilization of fixed assets may not be achieved due to

non availability of the working capital.

The business may fail to honour its commitment in time thereby adversely

affecting its creditability. This situation may lead to business closure.

The business may be compelled to by raw materials on credit and sell finished

goods on cash. In the process it may end up with increasing cost of purchase

and reducing selling price by offering discounts . both the situation would affect

profitable adversely.

Now avaibility of stocks due to non availability of funds may result in

production stoppage. While underassessment of working capital has disastrous

implications on business overassesments of working capital also has its own

dangerous.

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CONSEQUENCES OF OUR OWN ASSESMNET OF WORKING

CAPITAL:

 Excess of working capital may result in un necessary accumulation of

inventories.

 It may lead to offer too liberal credit terms to buyers and very poor

recovery system & cash management.

 It may make management complacent leading to its inefficiency.

 Over investment in working capital makes capital less productive and

may reduce return on investment.

Working Capital is very essential for success of business & therefore needs

efficient management and control. Each of the components of working capital

needs proper management to optimize profit.

INVENTORY MANAGEMNT: Inventory includes all type of stocks. For

effective working capital management, inventory needs to be managed

effectively. The level of inventory should be such that the total cost of ordering

and holding inventory is the least. Simultaneously stock out costs should be

minimized. Business therefore should fix the minimum safety stock level

reorder level of ordering quantity so that the inventory costs is reduced and outs

management become efficient.

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RECEIVABLE MANAGEMENT: Given a choice, every business would

prefer selling its produce on cash basis. However, due to factors like trade

policies , prevailing market conditions etc. Business are compelled to sells their

goods on credit. In certain circumstances a business may deliberately extend

credit as a strategy of increasing sales. Extending credit means creating current

assets in the form of debtors or account receivables. Investment in the type of

current assets needs proper and effective management as, it gives rise to costs

such as :

 Cost of carrying receivables

 Cost of bad debts losses

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 Thus the objective of any management policy pertaining to accounts

receivables would be to ensure the benefits arising due to the receivables are

more then the costs incurred for the receivables and the gap between benefit

and costs increased resulting in increase profits. An effective control of

receivables

Help a great deal in properly managing it. Each business should therefore try to

find out coverage credit extends to its clients using the below given formula:

Average Credit = Total amount of receivable

(Extend in days) Average credit sale per day

Each business should project expected sales and expected investments in

receivable based on various factor, which influence the working capital

requirement. From this it would be possible to find out the average credit

days using the above given formula. A business should continuously try to

monitor the credit days and see that the average. Credit offer to clients is not

crossing the budgeted period otherwise the requirement of investment in the

working capital would increase and as a result, activities may get squeezed.

This may lead to cash crisis.

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CASH BUDGET: Cash budget basically incorporates estimates of future

inflow and outflows of cash cover a projected short period of time which

may usually be a year, a half or a quarter year . effective cash management is

facilated if the cash budget is further broken down into months, weeks or

even a daily basis.

There are two components of cash budget are:

1. Cash inflows

2. Cash outflows

The main source for thses flows are given here under:

1. Cash Sales

2. Cash received from debtors

3. Cash received from Loans, deposits etc.

4. Cash receipts other revenue income

5. Cash received from sale of investment or assets.

39
CASH OUTFLOWS:

1. Cash Purchase

2. Cash payments to Creditors

3. Cash payment for other revenue expenditure

4. Cash payment for assets creation

5. Cash payments for withdrawals, taxes.

6. Repayments of Loan etc.

40
 DATA ANALYSIS

WORKING CAPITAL ESTIMATION

Current assets Loans & advances FY 17-18 FY 19-20 FY 21-22

Currents assets      

Inventories      

stock in trade 223.94 662.87 1176.85

work in progress 2528.4 4563.76 8714.56

raw materials 7224.96 8145.37 9242.58

stores and spare parts 1131.8 1463.13 1810.73

Total Inventories 11109.1 14835.13 20944.72

Debtors 5516.14 7402.6 14211.12

       

Cash & Bank balances 1027.1 8042.12 5225.01

(subtracting FCCB issue unutilized   -6910.46 -5272.52

money as it amounts to long term      

liability)      

loans and advances 3249.1 7529.5 8647.1

Net current assets 20901.44 30898.89 43755.43

Current Liabilities FY 05-06 FY06-07 FY 07-08

       

Sundry Creditors 1476.37 1589.57 3748.82

Creditors for capital expenditure 1456.05 365.64 258.4

other liabilities 342.26 645.34 621.04

unclaimed dividend 21.33 31.66 35.29

sundry deposits 174.14 229.23 321.66

advances from customers 217.21 362.59 73.55

interest accrued but not due on loan 7.04 20.05 32.12

Net current liabilities 3694.404 3244.08 5090.88

41
INVENTORIES

In the context of Venture Capital Managementthe major increase in the present

three financial years has been of the inventory.

INVENTORIES

25000

20000
stock in trade
15000 work in progress
raw materials
10000 stores and spare parts
Total Inventories
5000

0
FY 05-06
2017-18 FY 06-07
2019-20 FY 07-08
2021-22

Reasons:

 The pile up of inventory that is used in trial run, before hand to be used in

the checking the machinery & the newly installed production capacity.

 The increased inventory to produce more goods so as to utilize the new

plant set up

42
DEBTORS AND AVERAGE RECEIVABLES

The debtors are increasing heavily in the financial year 21-22 because of a sales

boom that has accounted for huge accounts receivables increase.

DEBTORS AND AVERAGE RECEIVABLES

16000
14000
12000
10000
8000 Debtors
6000
4000
2000
0
FY 05-06
2019-20 FY 18-19 FY 07-08
2021-22

43
CASH AND BANK BALANCES

Cash and bank balance as per the balance sheet it is seen to be increasing but

from the above chart it is seen to be decreasing. This discrepancy can be

attributed to the fact that balance sheet figures carry additional cash balance of

unutilized FCCB issue proceeds which amount to long term liability as well.

Thus the actual figures are distorted because the money from FCCB issue has to

be returned and it is a kind of long term loan which the company has sought for

expansion purpose. As a result to find the actual outlay of cash the unutilized

money has been subtracted. Also we should take note of the fact that the FCCB

money can only be used for expansion purpose and not as money for usual

application of working capital.

CASH & BANK BALANCE

5225.01
FY 21-22

8042.12
FY 19-20 Cash & Bank balances

1027.1
FY 17-18

0 2000 4000 6000 8000 10000

44
LOANS AND ADVANCES

Loans & advances are increasing on the part of increased advances that are

given to pile up inventory when the company went for the expansion mode

LOANS AND ADVANCES

FY 05-06
17-18
17%

FY 07-08
21-22 FY 05-06
44% FY 06-07
FY 07-08
FY 06-07
19-20
39%

CURRENT ASSETS includes cash & those assets which can be easily

converted into cash within a short period generally one year such as marketable

securities , bills receivables, sundry debtors, inventories, work in progress,

prepaid expenses etc .The total current assets are the sum of below contingency

i.e.

45
Current Assets = Stock/ Inventory + Sundry Debtors + Advances + Cash

and bank balances + other current assets

CURRENT ASSETS

loans and advances

FY 21-22
Cash & Bank balances
Debtors
Total Inventories
FY 19-20
stores and spare parts
raw materials
work in progress
FY 17-18
stock in trade

0 5000 10000 15000 20000 25000

NET CURRENT ASSETS

FY 17-18
22%

FY 21-22
46%

FY19-20
32%

Conclusions: The trend of the current assets in Venture Capital

Managementthroughout the period from 2005-08 are shown in the pie-chart .it

is evident from the table that the current assets in Venture Capital

Managementhas increased except in year 2021-22.

46
CURRENT LAIBILITIES

These are those obligations which are payable within a short period of generally

one year and includes outstanding expenses, bills payable, sundry creditors,

accrued expenses, bank overdraft, short term advances, income tax payable.

TOTAL CURRENT LAIBILITIES

Sundry Creditors
4000
Creditors for capital
3500
expenditure
3000 other liabilities
2500
2000 unclaimed dividend

1500
sundry deposits
1000
500 advances from
0 customers
FY 17-18 FY 19-20 FY 21-22 interest accrued but not
due on loan

NET CURRENT LAIBILITIES

6000

5000

4000

3000 Net current liabilities

2000

1000

0
FY 17-18 FY 19-20 FY 21-22

47
Conclusion: The trend of Current Liabilities of Venture Capital

Managementthroughout the period from 2019-2020 are shown in the table. It is

evident from the table that it shows increasing trends in the year 2021 to 2022.

It shows that the Venture Capital Managementhas stability in trends of Current

Liabilities.

48
CREDITORS AND CREDITORS OF CAPITAL EXPENDITURE

Creditors of Venture Capital Managementlimited are increasing from 70 Cr

(FY 17-18) to 18 Cr (FY 19-20) to 12 Cr (FY 21-22). The main reason for the

increase in can be attributed to the heavy purchase of the inventory for stocking

it up for trial run & use before the expansion mode.

Creditors for capital expenditure seem to be decreasing over the three years i.e.

from 18Cr (FY 19-20) to 12 Cr (FY 21-22) which is in sync with the fact that

the expansion work that has been in process and all preparations for that are

coming to an end.

CREDITORS FOR CAPITAL EXPENDITURE

1600
1400
1200
1000 Creditors for capital
800 expenditure
600
400
200
0
FY 17-18 FY 19-20 FY 21-22

49
 RATIO ANALYSIS

   FY 17-18  FY 19-20  FY 21-22

Current assets 29843.52 47163.72 61410.49

current liabilities 7611.44 6597.95 7459.4

quick assets 12759.32 14530.46 20880.64

quick liabilities 7611.44 6597.95 7459.4

Net turnover (sales) 45503 52527.1 81786.93

working capital 22232.08 40565.77 53951.09

average inventory (average of opening & closing stock

of year) 8594.615 14476.465 22666.83

cost of goods sold = cost of sales 37398 47018.31 67855.4

total assets 87666 124436.12 138465.6

total annual expenses -(depreciation +debt expenses) 37313.16 27364.06 23898.65

average gross income 97754.89 63633.37 51858

PROFIT before interest and taxes 5998 8120.16 14612.92

Total interest 747.8 2653.75 5214.77

Net Profit after tax (NPAT) 4115 3893.37 7383.56

capital employed (FA+CA-CL ) 89529.68 106917.71 111772.7

investment (FA+CA) 97141.12 113515.66 119232.1

Fixed assets 67297.6 66351.94 57821.59

LIQUIDITY RATIOS
50
CURRENT RATIO

Current ratio is defined as the relationship between current assets and current

liabilities. It is a measure of general liquidity & is most widely used to make the

analysis of short term financial position of a firm. Current ratio is the ratio of

current assets to current liabilities. A relatively higher ratio is an indication that

the firm is liquid and has the ability to pay its current obligations on time. On

the other hand a low current ratio indicates that the

Liquidity position of the firm is not good and shall not be able to pay its current

liabilities in time. Current Ratio:

The Current ratio is calculated by dividing current assets by current liabilities:

Current ratio: Current Assets

Current Liabilities

FIANANCIAL CURRENT CURRENT

YEAR ASSETS LAIBILITIES CURRENT RATIO

FY 2021-2022 29843.52 7611.44 3.92

FY 2019-2020 47163.72 6597.95 7.14

FY2017-2018 61410.49 7459.4 8.23

51
 CURRENT RATIO

20%

43% FY16-2015
2005-2006
FY15-2014
2006-2007
FY2007-2008
14-2013

37%

QUICK
ASSETS
QUICK
LIABILIT CURRENT QUICK
FIANANCIAL YEAR ITES LAIBILITIES RATIO

FY 2021-2022 12759.32 7611.44 1.67

FY 2019-2020 14530.46 6597.95 2.2

FY2017-2018 20880.64 7459.4 2.78

QUICK RATIO: Quick ratio or liquid ratio is a more rigorous test of liquidity

than the current ratio. The term liquidity refers to the ability of the firm to pay

short term obligations as and when they become due. Quick ratio may be

defined as ration of quick assets to quick liabilities. Liquid assets include all the

current assets excluding inventories & prepaid expenses. Liquid liabilities mean

all liabilities excluding bank overdraft. Inventories & prepaid expenses are not

termed as liquid assets because they cannot be converted into cash immediately

without a loss of value.

52
 QUICK RATIO

25%

42% FY 2021-2022
FY 2019-2020
FY2017-2018

33%

53
 CURRENT SCENERIO INTERPRETATION

While interpreting the figures of both the above ratios we should keep in mind

the following one point

 Venture Capital Management is a manufacturing concern

Since it is manufacturing concern the an excess of inventory as compared to

other industry models such as the services sector is an integral fact. As a result it

is bound to have higher current ratio and quick ratio as compared to other

industries.

The sharp rise of current ratio from 20% (FY 2017-18) to 37% (FY 2019-20)

to 43 %( FY 2021-22) Can be attributed to

a. Higher pile up of inventory which was to be used up for trial run in

producing new products from the new plant set up.

b. Higher prepaid expenses related to advances given so as to pile up the

inventory so that when the inventory is needed for trial run, it’s available.

c. An increase in average receivables which was in sync with increased

capacity of production and also increased sales.

An important point to note here is that an excess of cash balance arising out of

idle money coming out of FCCB issue expense has been deducted as

54
correspondingly it accounts for long term liability (debentures) which have no

effect on working capital management.

The quick ratio is a more important indicator of liquid position of Venture

Capital Managementas it hardly varies from 25% (FY 2019-20) to 33% (FY

2021-22). Obviously the effect of inventories has been negated.

EFFICIENCY RATIO

From the perspective of working capital management we would be discussing

three important ratios they are.

 Sales to working capital ratio

 Inventory turnover ratio

 Current assets turnover ratio.

55
SALES TO WORKING CAPITAL RATIO

This ratio is computed by dividing working capital by sales. This ratio helps to

measure efficiency of the utilization of net working capital. It signifies that for

an amount of sales. A relative amount of working capital is needed. If any

increase in sales in contemplated, working capital should be adequate & thus

this ratio helps management to maintain the adequate level of working capital

Financial Year FY 17-18 FY 19-20 FY 21-22

Sales to working capital ratio 2.046727 1.294863 1.51595

SALES TO WORKING CAPITAL RATIO

2.046727

2.5 1.515946
1.29486264
2
1.5
1
0.5
0
FY 2017-18 FY 2019-20 FY 2021-22

Sales to working capital ratio

CURRENT SCENERIO INTERPRETATION

As seen from the above table the ratio has decreased from 2 (FY 2018-19) to

1.29 in (FY 2019-20) and then increased to 1.5 (FY 2021-22). This ratio is

again indicative of the fact that the year in which the expansion took place

56
the sales did not match up with the scale of expansion. Otherwise it would

have remained intact and not decreased. The slight increase from 1.29 to

1.51 is indicative of the fact that the full impact of expansion is being slowly

realized & sales are slowly increasing.

57
INVENTORY TURNOVER RATIO

This ration indicates the effectiveness and efficiency of inventory management.

This ratio is calculated as cost of goods sold: average inventory shows how

speedily the inventory is turned into accounts receivables through sales. The

higher the inventory turnover ratio (also called stock velocity) the more the

efficient inventory management.

Financial Year FY 2017-18 FY 2019-20 FY2021-22

inventory turnover ratio/ stock velocity 4.351329 3.2479138 2.9936

INVENTORY TURNOVER RATIO

FY21-22

inventory turnover ratio/

FY 19-20
stock velocity

FY 17-18

0 1 2 3 4 5

58
CURRENT SCENERIO INTERPRETATION

The stock velocity is decreasing subsequently from 4.35 (FY 19-20) to 2.99

(FY 21-22) which shows inefficiency on the part of inventory management.

Partly the reason for the fall can be attributed to stocking up of inventory for

the trail run & using them in testing the expansion mode machinery.

CURRENT ASSETS TURNOVER RATIO

This ratio is indicated by sales upon current assets. This ratio indicates the

efficiency with which the current assets turn into sales & higher current assets

turnover ratio implies by & large a more efficient use of funds in current assets.

Thus, a high turnover rate indicates reduced lock up of funds in current assets.

An analysis of this ratio over a period reflects working capital management of

the firm

Financial Year FY 17-18 FY 19-20 FY21-22

current assets turnover ratio 1.52472 1.11371834 1.331807

59
 CURRENT ASSETS TURNOVER RATIO

1.6 1.52472
1.4 1.331807
1.2 1.11371834
1
0.8 current assets turnover
ratio
0.6
0.4
0.2
0
FY 17-18 FY 19-20 FY21-22

CURRENT SCENERIO INTERPRETATION

The ratio is slightly decreasing from 1.52 (FY 17-18) to 1.11 (FY 19-20) &

then increasing to 1.33 (FY 21-22) which shows that sales increase is not

matched by the increase in current assets in the expansion phase of Venture

Capital Management. The reason can be well attributed to the piling up of trial

stock and not full use of the expanded production capacity.

OPERATING RATIOS

 Working ratio

 Interest coverage ratios

60
WORKING RATIO

A ratio used to measure a company's ability to recover operating costs from

annual revenue. This ratio is calculated by taking the company's total annual

expenses (excluding depreciation and debt-related expenses) and dividing it

by the annual gross income. A working ratio below 1 implies that the

company is able to recover operating costs, whereas a ratio above 1 reflects

the company's inability to do so.

61
 Financial Year FY 21-22 FY 19-20 FY17-18

working ratio 0.381701 0.43002689 0.460848

WORKING RATIO

FY 21-22 0.460848

FY 19-20 0.43002689 working ratio

FY 17-18 0.381701

0 0.1 0.2 0.3 0.4 0.5

62
CURRENT SCENERIO INTERPRETATION

The ratio consistently has been below 1 which means company can very well

take out its operating costs, though the margin of comfort is slightly decreasing

because of the increase in expenses of the United Engineering Services

63
 CONCLUSION

Working capital management is an important aspect of any business. Every

business concern should have adequate working capital to run its business

operation. Every concern should have neither redundant of excess working

capital nor inadequate or shortage of working capital. Both excess as well as

short working capital positions are bad for any business.

The three elements of working capital management are cash management

receivable management and inventory management. If a finance manager

maintains these three elements of working capital management properly means

the concern will get dramatic improvement in their sales volume and also in

business. Working capital policies of a firm have a great effect on its

profitability, liquidity and structured health of the organization.

Every concern should adopt some new tread management strategies that will

help in greater productivity, inventory optimization and also better working

capital management. So, it is noted that working capital is a means to run

business smoothly and profitability. Thus, the concept of working capital has

its own important in a going concern.

64
Good management of working capital is part of good finance management

effective use of working capital will contribute to the operational efficiency of a

department; optimum use will help to generate maximum return.

Venture Capital Managementis also using “SAP” 6.0 versions which is very

advanced to do every transaction of any organization. ‘SAP’ 6.0 also applicable

for e-transaction.

65
 BIBLOGRAPHY

 Barry, Christopher B. "New directions in research on venture capital

finance." Financial management (1994): 3-15.

 Bascha, Andreas, and Uwe Walz. "Financing practices in the German

venture capital industry: an empirical study." Venture capital in Europe.

Butterworth-Heinemann, 2007. 217-231.

 Manigart, S., & Sapienza, H. (2017). Venture capital and growth. The

Blackwell handbook of entrepreneurship, 240-258.

 Bascha, A., & Walz, U. (2002). Financing practices in the German

venture capital industry: An empirical assessment (No. 2002/08). CFS

Working paper.

 Bottazzi, L., & Da Rin, M. (2002). Venture capital in Europe and the

financing of innovative companies. Economic policy, 17(34), 229-270.

 Metrick, Andrew, and Ayako Yasuda. Venture capital and the finance of

innovation. John Wiley & Sons, 2021.

66