Harsha Vardhan Record

A STUDY ON WORKING CAPITAL MANAGEMENT
CHAPTER 01
INTRODUCTION
KLE SOCIETY’S DEGREE COLLEGE, NAGARBHAVI 1

FINANCE:
Finance is regarded as the lifeblood of a business enterprise. This is because

in the modern money- oriented economy finance is one of the basic
foundations of all kinds of economic activities. Without adequate finance
no business can survive or accomplish its objectives.
In general, finance may be defined as the time it is wanted. Thus finance

refers at making provision of money at the time when it is required.
Finance studies addresses the ways in the individuals, businesses, and

organization raise, allocate, and monetary resources over time, taking into
account the risks entailed in the project. The term "Finance" may thus
incorporate any of the following:
 The study of money and other assets

 The management and control of those assets
 Profiling and managing project risks
 The science of managing money
The word finance comes from the Latin word "firms". Finance si the art and
science of handling money. Finance is different from money. Finance may
be defined as the provision of money at the time when it is needed. Every
enterprise whether big medium or small needs finance at carry out on its
operation and achieve its goals. It rightly described as the life blood of
business. Finance function or business finance is concerned with
procurement of funds and their effective utilization in the business.
Finance is used by individuals (personal finance), by government (public

finance), by business (corporate finance), as well as by wide variety of
organization including school and non-profit organization. In general, the
goals of each of the above activities are achieved through the use if
appropriate financial instruments, with consideration to their institutional
setting. Finance is one of the most important aspects of business
management.
DEFINITION:

According to, GUTHMANN &DONGALL "Business Finance can be

broadly defined as the activity concerned with planning, organization,
controlling, and administration of funds used in business.
According to, PARTHER & WERT "Business finance deals primary with
rising, administration and distribution of funds by privately owned with
operating in non-financial fields
of industry."
FINANCIAL MANAGEMENT:
Financial management is two way process in which finances manager

obtain funds and money at low cost and risk and use it in higher earning
project at minimum risk. Expert says that
it is science to earn maximum return at minimum risk and control. In

financial management, following decision is taken technically.
Financial management is the planning of the requirement of capital

investment with the objective of earning higher return incurring the least
cost and efficient management of the financial management of the financial
affairs of any business enterprise.
Financial management may be defined as "Financial management is the

integral part of general management engaged in rising of finance, allocation
and utilization of finance or funds and other managerial function for the
overall growth of the enterprise."
Financial analysis is the process of identifying, interpreting the financial

statement for the purpose of deriving conclusion for decision making. It
helps at identify the firm's financial. There are various techniques used at
analyse the financial statements such as - ratio analysis, fund flow, cash
flow, trend analysis, comparative balance sheet analysis etc.
AN OVERVIEW OF FINANCIAL MANAGEMENT: The three broad

activities of financial management are:
* Financial analysis, planning and control

* Management of firm's assets structure
* Management of the firm's financial structure
OBJECTIVES OF FINANCIAL MANAGEMENT:
For making wise decision regarding the allocation of financial resources, a

clear understanding of the objectives is necessary. The objective provides a
framework for optimum financial decision, making. These are mainly two
approaches of financial management.
A) Profit Maximization Approach:
Profitability refers to situation where output i.e., the value created by the
use of resources is more than the total of the input resources. Used in this
sense, profit maximization would imply that a firm should be guided in
financial decision making by one test, select assets, projects and decisions
which are profitable and reject those which are not.
B) Wealth Maximization Approach:
Wealth maximization is also known as value maximization or net present

worth maximization. In the current academic literature, wealth
maximization is almost universally accepted as an appropriate decision
criterion for financial management decision as it removes the technical
limitations of profit maximization criterion.
According to Adam Smith, "wealth is defined as wealth to owners". Wealth

Maximization is conceptually superior at maximization of profit,
maximization of earnings per share and return on equity.
IMPORTANCE OF FINANCIAL MANAGEMENT IN BUSINESS
 Smooth running of the business

 Decision making
 Solution to financial problems

 Determination of business success

 Successful promotion
 Coordination of financial activities
NATURE AND SCOPE OF FINANCIAL MANAGEMENT
The scope of financial management extends to the decisions pertaining at

optimal utilization of financial resources. The role of a finance manager is
at resolve the issues that are commonly
categorized into - financing decisions, working capital decisions, and

dividend decisions. Al these issues are resolved in the light of their probable
impact on the wealth of the shareholders, which is the undisputed and
commonly accepted go for al for profit' organization.
The finance department of the organization is responsible for the financial

management of the firm, which it does through the means of financial
decision making. Financial management performs facilitation,
reconciliation, and control functions in an organization. The sourcing of
finances needed by various departments and its rational allocation for
various activities is done by the finance department. This facilitates the
attainment of the various departmental goals along with the realization of
the over organizational goal. The rational and balanced allocation of
resources done by the finance department reconciles the interests of e
various departments and pre-empts any kind of conflict for resources that
may occur between the various departments of an organization.
WORKING CAPITAL MANAGEMENT
The success of business, among other things depends upon the manner in
which its capital is managed in the dynamic business setting, the

composition of working capital mismanaged, in the dynamic business

setting, the difference between the current assets and current liabilities.
Constantly changes in relation to the level of activity of the business

concern and rates at which the current assets of current liabilities keep
changing in relation to each other and other things are significant factors
also continuous review and direction of the financial manager .
It is the task of the financial maintain an appropriate level of working

capital that is enough current assets to pay off current liabilities neither
excess nor less because excessive working capital leads to interruption in
the smooth functioning of the business concern. There are numerous
instances in the history of business world where inadequacy of working
capital has led to business failures when a firm finds it difficult to meetings
day to day.
Operating expenses essential out lays may have to be postponed for want of
funds, operating plans will go out of gear & enterprise objectives on
investment slumps the suppliers & creditors of the firm may have to wait
longer to raise their dues & will hesitate to extend further credit to the firm .
Thus efficient management of working capital in an important prerequisite

for successful working of a business concern it reduces the chances of
business failure generates a felling of security and confidence in the minds
of personnel in the organization it assurance solvency of steady of the
organization

METHODOLOGY
Primary Data
DEF: The first handed information/Fresh data collected through various

methods is known as primary data .In respect of primary data which the
researchers is directly collects data that have not been previously collected.
The primary data was gathered through personal interaction with various
functional heads and other technical personnel. Some information was also
collected by observation.
Secondary Data :
DEF: The data which have been already collected & comprised for another
purpose. Secondary data was collected various reports / annual reports,
documents charts, management information systems, etc in SRI SAI. And
also collected various magazines, books, newspapers and internet. The
analysis of the information gathered has been made on the basis of the
clarifications sought during the personal discussions with the concerned
people and perception during the personal visits to the important areas
services .
In marking observations identifying problems and suggesting certain

remedies such emphasis was given on the basis of opinions gathered during
the personal discussions and with the personal experience gained during the
academic study of B.COM course.

SCOPE OF THE STUDY
1.The scope is limited to operations of SRI SAI TRANSFORMERS AND

CHOKES Bangalore
2.The period consider 2 months The scope of the study is limited to

collecting the financial data published in the annual reports of the company
with reference to the objectives state above and an analysis of the data with
a view to suggest favourable solution to various problems related to
financial performance.

LIMITATION OF THE STUDY:

1. The following are the various aspects involved in the analysis of the
study.
2. The study in limited 4 years (2022-2023) to (2023-2024) performance of

the company.
3. The data used in this study have been taken from published annual report
only.
4. This study in conducted within a short period. During the limited period
the study may not be retailed, full fledged and utilization in all aspects.
5. Financial accounting does not take into account the price level changes

CHAPTER 2

Introduction of chokes and transformer

Transformers:
Transformers are passive electrical devices that transfer electrical energy
from one circuit to another through electromagnetic induction. They consist
of two or more coils of wire wound around a core, typically made of iron or
ferrite. The primary coil receives electrical energy, generating a magnetic
field that induces a voltage in the secondary coil. This process enables
voltage transformation, isolation, and impedance matching.
Introduction:
Transformers have been pivotal since their introduction by Michael Faraday

in the early 19th century. They revolutionized electricity distribution,
enabling the transmission of power over long distances efficiently. Over
time, transformers have become indispensable in various applications,
including power generation, transmission, and distribution, as well as
electronic devices like chargers and adapters.
Chokes:
Chokes, also known as inductors or reactors, are passive electrical

components primarily used to limit or control the flow of electrical current.
They consist of a coil of wire wound around a core, similar to transformers,
but chokes typically have fewer turns of wire and are designed to operate at
lower frequencies. Chokes are often used for filtering, noise suppression,
and impedance matching in electronic circuits.

Introduction:
Chokes have a long history dating back to the early days of electrical
engineering. They were initially used in telegraphy and early radio systems
for signal filtering and tuning. Over time, their applications expanded to
various industries, including power electronics, telecommunications, and
audio equipment. Today, chokes are essential components in power
supplies, motor drives, inverters, and electronic filters, contributing to the
efficiency and reliability of modern electrical systems.

Transformers and chokes procedure
Manufacturing transformers and chokes can be quite an intricate process. It

involves precise engineering, careful selection of materials, and meticulous
assembly to ensure optimal performance and reliability. Here's a breakdown
of the experience:
Design Phase: It starts with designing the transformers and chokes

according to the specifications required by the application. This involves
calculations for the required voltage, current ratings, frequency response,
and other parameters.
Material Selection: Choosing the right materials is crucial for the

performance and longevity of the transformers and chokes. This includes
selecting the appropriate core material (such as ferrite or laminated steel),
wire gauge for windings, insulation materials, and mounting hardware.
Winding: Winding coils around the core is a delicate process that requires
precision. The number of turns, the arrangement of windings, and the
spacing between layers all affect the performance of the transformer or
choke.
Assembly: Once the coils are wound, they need to be carefully assembled
into the final product. This may involve mounting the coils onto the core,
connecting terminals, and adding any necessary insulation or shielding.

Testing and finishing process
Testing: Testing is a critical step to ensure that the manufactured

transformers and chokes meet the required specifications. This may involve
testing for electrical parameters such as impedance, inductance, and leakage
inductance, as well as mechanical tests for durability.
Quality Control: Throughout the manufacturing process, quality control

measures are implemented to identify and address any defects or
inconsistencies. This helps ensure that the final products meet the highest
standards of quality and reliability.
Overall, manufacturing transformers and chokes requires a combination of

technical expertise, attention to detail, and quality assurance processes to
deliver products that meet the needs of various industries, from power
distribution to electronics manufacturing. It can be a challenging yet
rewarding experience, especially when you see the final products in action,
efficiently powering devices or filtering electrical signals

Uses of transformers and chokes
Voltage Transformation: Transformers are widely used to step up or step

down AC voltages. This is essential for power distribution, allowing
electricity to be transmitted at high voltages over long distances with
minimal loss and then stepped down to safer levels for use in homes and
businesses.
Current Transformation: Transformers can also transform current levels

while keeping the voltage constant. This is useful in applications such as
welding, where high currents are needed.
Isolation: Transformers provide electrical isolation between the input and

output circuits. This isolation helps protect equipment and users from
electric shocks and prevents ground loops.
Impedance Matching: Transformers are used for impedance matching in

audio systems and RF circuits. They match the impedance of the source
with that of the load to maximize power transfer and minimize signal
distortion.

Transformers are used for coupling signals between different stages of

amplifiers and other electronic circuits. They can pass AC signals while
blocking DC, which helps in separating audio or data signals from power
supplies.
Filtering and Regulation: Chokes, also known as inductors, are used in

power supplies and electronic circuits to filter out noise and ripple from DC
power sources. They help smooth the output voltage and improve the
stability of the system.
Energy Storage: Chokes store energy in their magnetic fields when current
flows through them. This energy can be released back into the circuit when
needed, providing a form of energy storage in applications such as DC-DC
converters and inverters.
EMI Suppression: Chokes are also used to suppress electromagnetic

interference (EMI) in electronic circuits. They act as low-pass filters,
attenuating high-frequency noise and preventing it from interfering with
sensitive components or nearby equipment.

Transformers and chokes
Early Transformer Development (late 19th century): The concept of

electromagnetic induction, which is the principle behind transformers, was
discovered by Michael Faraday in the early 19th century. However, it
wasn't until the late 19th century that practical transformers were
developed. In 1885, William Stanley Jr. invented the first practical
transformer, which played a crucial role in the development of alternating
current (AC) power systems.
Rise of AC Power Systems (late 19th to early 20th century): With the
introduction of practical transformers, AC power systems became more
viable for long-distance power transmission. This led to the "War of
Currents" between proponents of alternating current (AC), led by George
Westinghouse and Nikola Tesla, and proponents of direct current (DC), led
by Thomas Edison. Ultimately, AC power systems, enabled by
transformers, prevailed due to their ability to efficiently transmit power
over long distances.
Early Choke Development: Chokes, or inductors, have been used in

electrical circuits since the early days of electrical engineering. Their
properties were studied alongside other passive components like resistors
and capacitors. Chokes were initially used in telegraphy and early telephone
systems for signal filtering and impedance matching.

Expansion into Electronics (20th century): Throughout the 20th century,

transformers and chokes found widespread use in various applications,
including telecommunications, power distribution, industrial machinery,
and consumer electronics. As electronics technology advanced,
transformers and chokes became indispensable components in power

supplies, audio amplifiers, radio frequency (RF) circuits, and more.
Modern Applications: In recent decades, transformers and chokes have

continued to evolve to meet the demands of emerging technologies such as
renewable energy systems, electric vehicles, and high-speed data
communication networks. Advanced materials, manufacturing techniques,
and design methodologies have improved their efficiency, reliability, and
performance.
Today, transformers and chokes are ubiquitous in virtually every aspect of

modern life, playing essential roles in power generation, distribution, and
utilization, as well as in electronics and telecommunications. Their
introduction marked a significant milestone in the development of electrical
engineering and paved the way for the electrification of the world.

Types of chokes
Inductor Chokes: These are basic chokes consisting of a coil of wire

wound around a core. They are used to limit or choke AC current in a
circuit. Inductor chokes are often used in power supplies and electronic
filters.
Common Mode Chokes: Also known as differential mode chokes, these

chokes are designed to filter out common mode noise in electronic circuits.
They are often used in applications where electromagnetic interference
(EMI) needs to be suppressed, such as in power lines and signal cables.
RF Chokes: Radio frequency (RF) chokes are specifically designed to

block or attenuate high-frequency signals while allowing low-frequency
signals to pass through. They are commonly used in RF circuits, antennas,
and radio equipment.
Toroidal Chokes: Toroidal chokes consist of a coil of wire wound around a

toroidal (doughnut-shaped) core. They offer high inductance and low
electromagnetic interference due to their compact and symmetrical design.
Toroidal chokes are used in various applications, including power supplies,
audio equipment, and electronic filters.

Line Chokes: Line chokes, also known as power line chokes or input
chokes, are used to smooth out fluctuations in AC power lines and reduce
electrical noise in power supplies. They help improve the efficiency and
stability of power systems by filtering out harmonics and other
disturbances.
Filter Chokes: These chokes are used in conjunction with capacitors to

create LC (inductor-capacitor) filters. They help to smooth out voltage and
current fluctuations in power supplies and electronic circuits.

Phases of choke
Single Phase Chokes: These chokes have a single winding or coil. They
are commonly used in single-phase circuits where the current needs to be
controlled, filtered, or regulated. Single-phase chokes can be found in
various applications such as power supplies, motor drives, and lighting
systems.
Three-Phase Chokes: These chokes have three windings or coils and are
designed to operate in three-phase electrical systems. Three-phase chokes
are used to control current, reduce harmonics, and improve power quality in
industrial and commercial applications. They are often employed in motor
drives, variable frequency drives (VFDs), and power distribution systems.

Types of transformer
Transformers are essential electrical devices that transfer electrical energy
between two or more circuits through electromagnetic induction. They are
categorized based on various factors such as construction, application, and
voltage regulation. Here are some common types of transformers:
Step-Up Transformer: A step-up transformer increases the voltage level

from the primary winding to the secondary winding. It is commonly used to
step up the voltage for long-distance power transmission, electrical
distribution systems, and high-voltage equipment.
Step-Down Transformer: Conversely, a step-down transformer decreases

the voltage level from the primary winding to the secondary winding. It is
frequently employed to reduce high-voltage electricity to a lower voltage
suitable for residential, commercial, and industrial applications.
Isolation Transformer: Isolation transformers electrically isolate the

primary and secondary windings, preventing direct current flow between
the input and output circuits. They are often used to provide galvanic
isolation, noise reduction, and safety in sensitive electronic equipment,
medical devices, and audio systems.
Auto-Transformer: An auto-transformer has a single winding shared

between the primary and secondary circuits, unlike conventional
transformers with separate windings. Auto-transformers are used for
voltage regulation, impedance matching, and starting large induction
motors efficiently.

Distribution Transformer: Distribution transformers are commonly

employed in electrical distribution networks to step down high-voltage
electricity from transmission lines to lower voltages suitable for consumer
use. They are found on utility poles, substations, and underground vaults,
supplying power to residential, commercial, and industrial areas.
Instrument Transformer: Instrument transformers are specialized

transformers used to measure voltage and current in high-voltage power
systems. Current transformers (CTs) step down high currents to measurable
levels, while potential transformers (PTs) step down high voltages for
accurate voltage measurements.
Power Transformer: Power transformers are large transformers designed

for high power applications such as power generation, transmission, and
distribution. They handle large electrical loads and operate at high voltages
and currents, providing efficient energy transfer over long distances.
Resonant Transformer: Resonant transformers are tuned to resonate at

specific frequencies, making them suitable for applications like radio
frequency (RF) amplification, induction heating, and electronic ballasts.

Phase of transformer
Transformers can also be classified based on the number of phases they are
designed to handle. The most common types are:
Single-Phase Transformer: This type of transformer has two windings,

one primary and one secondary, and is designed to work with single-phase
alternating current (AC) power. Single-phase transformers are commonly
used in residential, commercial, and small industrial applications where
single-phase power distribution is sufficient.
Three-Phase Transformer: Three-phase transformers have three primary

windings and three secondary windings, designed to handle three-phase AC
power. They are widely used in industrial and commercial settings where
three-phase power distribution is common. Three-phase transformers are
crucial for powering large motors, machinery, and industrial equipment
efficiently.
The choice between single-phase and three-phase transformers depends on

the specific requirements of the electrical system and the application it
serves. Three-phase transformers are more common in industrial
environments where high-power equipment is utilized, while single-phase
transformers are often found in residential and small commercial
applications.

Procedure to connect transformers
Connecting transformers involves several steps to ensure safety and proper

functionality. Here's a general procedure:
Safety Precautions:
Ensure that the transformer and all associated equipment are de-energized
before starting any work.
Use appropriate personal protective equipment (PPE), such as insulated

gloves and safety glasses.
Inspect Equipment:
Check the transformer and associated equipment for any signs of damage or
defects.
Verify that the transformer is the correct size and rating for the application.
Prepare the Site:
Ensure there is enough space around the transformer for safe access and
ventilation.
Clear away any debris or obstacles that may interfere with the installation.
Positioning:
Carefully position the transformer in its designated location, taking into

account any lifting or rigging requirements.
Use appropriate lifting equipment and techniques to move the transformer

into place.

Electrical Connections:
Identify the primary and secondary terminals of the transformer.
Connect the primary terminals to the power source according to the

specified voltage and phase configuration.
Connect the secondary terminals to the load or distribution system, ensuring

correct phase orientation and polarity.
Grounding:
Properly ground
Transformer according to local codes and regulations.
Connect grounding conductors to designated grounding points on the

transformer and within the electrical system.
Insulation Testing:
Perform insulation resistance tests to verify the integrity of the electrical

insulation.
Use a megohmmeter to measure insulation resistance between windings and

between windings and ground.
Commissioning:
Once all connections are verified and tested, energize the transformer and
monitor for proper operation.
Check for any abnormal noises, vibrations, or overheating during the initial
startup phase.

Measure voltage, current, and other relevant parameters to ensure they are
within acceptable limits.
Documentation:
Keep detailed records of the transformer installation, including connection

diagrams, test results, and any modifications made during the process.
Update electrical drawings and equipment documentation as necessary.
Safety Checks:
After commissioning, perform a final safety inspection to ensure all

connections are secure and properly insulated.
Label all terminals and connections with appropriate markings for future
reference.
Training and Maintenance:
Provide training to personnel responsible for operating and maintaining the

transformer.
Establish a regular maintenance schedule to inspect and test the transformer

for continued safe and reliable operation.




CHAPTER 4
CONCEPTUAL & METHODOLOGLCALFRAME WORK

NATURE OF WORKING CAPITAL

Working capital management in concerned with the problem that arises in
attempting to manage the current assets current liabilities and the inter
relationship the exist between them the term current assets refers to those
assets which in ordinary course of business can be or will be turned into
cash with in one year without undergoing diminution in value and without
undergoing in value and without disrupting the operations of the firm
.The major current assets are cash marketable securities accounts receivable
and inventory, current liabilities those liabilities, which are their inception
to be paid in the ordinary course of business with in a year current liabilities
are amount payable, bills payable bank overdraft and outstanding expenses.
DEFINITION OF WORKING CAPTIAL:

According to MY Khan and P.K Jain “Working capital refers to manage the
firm current assets and current liabilities in such a way that a satisfactory
level of working capital is maintained .According to the Shubin “working
capital is an amount of fun is necessary to cover the cost of operating the
enterprise”. Working capital management is concerned with the problems is
that arise in attempting to manage the current assets and the current
liabilities and their inter relationship they arise between them. Current
assets refer to those assets which to ordinary course of business can be or
will be turned into cash within one year without undergoing in value and
without disrupting the operations of the firm. The major current assets are
cash marketable securities accounts receivable and their inception to be
paid in the ordinary course of business within a year out of Current Assets
or earnings of the concern. The basic Current Liabilities are Bill payables,
Bank Overdrafts and Outstanding expenses. The goal of working capital
managements is to manage the firms Current Assets. And Current
Liabilities in such a way that a satisfactory level of working capital is
maintained.

Thus 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 asset must be efficiently in order to maintain the liquidity of the
short term be managed efficiently in order to maintain the liquidity of the
short term sources of financing must be continuously managed to ensure
that they are obtained and used in a best possible way. Therefore interaction
between current assets and current liabilities in the main theme of working
capital Management. The current assets should be large enough to cover is
current liabilities in order to ensure a reasonable margin of safety. The
interaction between current assets and current liabilities in therefore the
main theme of the threat of working capital management. The two concepts
of working capital are:
Methodological Framework
The data for the period 2001-2005 used in this study have been taken from
primary and secondary sources. The necessary primary data have been
collected from corporate office of the organization; secondary data have
been collected from the financial statements published in the report of the
PRAGATOOLS LTD. Data was analysed through various established
techniques of working capital and personal observation. Editing the data,
clarification and tabulation of the financial data collection from the above
mentioned source have been done as per the requirements of the study. Data
has been analysed using various comparative statements and working
capital ratios. The data is analysed in the chapter-4 ‘Analysis of Working
Capital SRI SAI TRANSFORMERS AND CHOKES under the following
head.
Collection Period5.Inventory Management a)Inventory to Total Current

Asserts b)Inventory Turnover Ratio c)Inventory Holding Period in Days
4.4 NEED FOR WORKING CAPITAL:

Working capital is the amount of funds necessary to cover the cost of

operating the enterprise. Working capital in a going concern is revolving
funds; it consists of cash receipts from sales which are used to cover the
cost of current operations. The need of working capital arises because of
time gaps in manufacturing and marketing cycle of business operations.
This time gap is due to time gaps between Cash and purchase of Raw-
Materials .a)Purchase and production b)Production and sales c)Sales and
Realization of cash .During these intervals, the company should have ready
working or operating funds to keep their business going. Thus every
business concern1.Trends in Net Working Capital2.Working Capital Ratios
a)Current Ratios b)Quick or Acid test Ratio c)Current Assert Turnover
Ratio d) Current Asserts to Total Asserts Turnover Ratioe)Working Capital
Turnover Ratio3.Cash Management a)Percentage of Cash to Current
Asserts4.Receivables Management a)Debtors Turnover Ratio b)Debtors
should have sufficient liquidity funds as its disposal to buy Raw-Materials,

stores etc to pay wages to personnel and to meet incidental expenses with
the installed plant equipment, tools and other fixed assets, the concerned
would be able to produce finished goods by spending cash or Raw
Materials, intermediate goods Labor remuneration etc. The goods so
produced will swell into inventories or stock soon, the stock will take the
form of debtors or Bill Receivable on maturity .There is therefore, a need
for working capital, because the production Sales and cash payment and
realization of cash are not instantaneous, the company needs cash to
purchase Raw material and to meet expenses as there may not be helps to
meet future agencies. The stocks or Raw materials are kept in order to
assure smooth production and protect against the risk of Non availability of
raw material. Similarly, stocks of finished goods have to be carried to meet
the demands of the customers on continuous basis and sudden demand.
Thus, an adequate amount of funds has to be invested in current assets for
smooth and uninterrupted. Production and sales process, which is refers to

as operating cycle or cash cycle. The operating cycle determines the need
for working capital .The operating cycle represents the period during which
investment of one unit of remain blocked till recovery out of revenue, in
other words, the operating cycle refers to the time necessary to complete.
a)Conversion of cash into Raw Material. b)Conversion of Raw Material
into finished goods. c)Conversion of finished goods into cash sales or credit
sales. d)Conversion to credit sales or receivable into cash .Thus, it is said
Management must know the length of time required to convert cash into
resource used by the firm, the resource into the resource used the firm
the resource into final product. The final product into receivable bank into
cash. This is the operating cycle of an enterprise .Thus, it is said
Management must know the length of time required to convert cash into
resource used by the firm, the resource into the firm the resource into final
product. The final product into receivable bank into cash .This is the
operating cycle of an enterprise. The pattern of operating cycle depends
upon the nature of the enterprise. The financial institution may have a
shorter cycle while trading concern has and extended one. The usual
operating cycle of manufacturing concern is shown. In real business
situation, the operating or cash flow cycle in not as simple and smooth
going as the depicted above. A going concern by nature undergoes the
process of liquidity the besides, a circular flow among working capital
itself, all process of liquidity valued added to the product of the firm.
Therefore, we can say that, working capital in needed not only for financing
current assets but also to meet various other requirements like payment of
dividends, interest etc. Therefore, it is recovery for a product financial
manager to provide correct amount of working capital at the time to provide
for operating reach.
5.5 SCOPE OF WORKING CAPITAL MANAGEMENT
Since a firm has to maintain a sound working position and there should be
optimum investment in working capital, effective management involves

manages of current assets and current liability. Current asserts management

Involves management of current assets like Cash. Marketable Securities,
Account Receivable, inventories etc. effective in order to maintain liquidity
of the firm. The process of current asserts management can be as follow
management of cash and Marketable Securities. a)Management of cash and
Marketable Securities.
b)Management of Cash. Current liability management is concerned with the

management of curr3ent liabilities like, trade Credit or Account Payable,
Accruals etc. which represents short term financial source and must be
cautiously management to ensure that they are obtained and used in the
best way possible.
4.6 OBJECTIVES OF WORKING CAPITAL
The main if working capital management in to attain trade off between

profitability and risk. Here risk refers to the profitability that a firm will
become technically involvement that is unable to pay obligation promptly.
Risk is commonly measured by using either the amount of net working
capital of the current ratio. Thus more the net working capital the more
liquidity is associated with increasing levels of risks. To have higher profit
the firm may have to sacrifice solvency that is take the risk of technical
insolvency and maintain relatively low level of current assets. When the
firm does so, its profitability would improve but greater risk of technical
insolvency. Thus, if a firm wants to increase profitability it must also
increases its risk and if it want to decrease risk, it must decrease
profitability. Thus, working capital management involves trade off between
risk and profitability.

COMPONENTS OF WORKING CAPITAL
The main components of working capital are currents assets & currents
liabilities.
A. CURRENT ASSETS:
Current assets comprised items that would get converted in to cash in short
term, within a year, through the business operations current asserts include.
Inventories including stock of raw material, work in progress, finished
goods & factory supplies. Packing, shipment material, office supplies etc
Loan & advances, other balances; include sundry debtors, bills receivables
and others including loans and advances, prepaid expenses etc. Marketable
securities including government securities and semi government securities,
cash and bank balances.
B. CURRENT LIABILITIES:
Current liabilities are those which are expected to fall due of mature for
payment in short period of one year and they represent short term source of
funds. They include:
C. SHORT TERM BORROWINGS:
Include bank borrowings other than those against own debentures and other
mortgages, trade creditors and other labializes sundry creditors, outstanding
expenses and advances received etc. Provision for taxation, dividends and
other current provisions.
GROSS WORKING CAPITAL:
Gross working capital in represented by the sum total of all current assets of
the enter price adequate funds have to be provided to sustain the movement
of the row material through the work in process to the finished goods stage
and then to receivables and up to realization of cash.

NET WORKING CAPITAL:
Net working capital in excess of current assets over current liabilities the
concept of net working capital highlights the character of serves from which
the funds have been obtained to support that position of current liabilities.
NEED FOR WORKING CAPITALS
PRORIETORS
PERMANENT AND TEMPORARY WORKING

CAPITAL:
The above figure shows permanent level is fairly constant, working capital
is fluctuating some times increasing and some time decreasing in
accordance with seasonal demands, in the case an expanding firm the
permanent working capital may not be horizontal. This is because the
demand for permanents current asserts might be increasing or decreasing
support a rising level of activity. In that the line should be a rising one.
THE DANGERS OF EXCESSIVE WORKING CAPITAL
1.It results in unnecessary accumulation of inventories thus chances of

inventory mishandling waste theft and losses increases.
2.It is an indication of defective credit policy and slack collection period.

Consequently higher incidence of bad debts results, which adversely effect
degenerated into management co placement, which degenerated into
managerial inefficient.
3.Excessive working capital makes management complacent, which

degenerates into managerial efficiency.
4.Tendencies of accumulating inventories to make speculation 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 CAPTIAL
1.It stages growth and become difficult for the firm to undertaken profitable
projects for non-availability of working capital funds.
2.It becomes difficult to implement operating plans and achieve the firms
profit target.
3.Operating inefficiencies creep in when it becomes difficult even to meet

day-to-day commitments
4.Fixed assets are not efficiently utilized for the lack of working capital
funds thus the firms profitability would deteriorate.
5.Paucity of working capital funds renders the firm unable to avail

attractive credit opportunities etc.
6.The firm losses its reputation when it is not in position to honour its short
term obligation as result the firm faces tight credit terms.
ROLE OF FINANCIAL MANAGER IN WORKING

CAPITALMANAGEMENT:
1.Working capital management requires must of the finance manger time

as it represent a large position of investment is assets.
2.Working capital management requires much of the finance management

time as it represent larger position of investment in assets.
3.Action should be taken to curtail unnecessary investment in current

assets.
4.All precautions should be taken for the effective and efficient

management of working capital.

5.Larger firms have to manage their current assets and current liabilities
very carefully and should see that the work should be done properly in
order to achieve predetermined organization goals.
6.The financial manger should pay special attention to the managements of

current assets on continuing basis.
FUNDS FLOW STATEMNET
Funds flow analysis design effective management toll to study how funds
have been procured for the business and how they have been employed. The
statement of variation in working capital is based fundamentally on the
same approach used for the preparation of funds flow statement. This
technique helps to analyses changes in working capital between dated or
two balance sheets. The comparison of current assets and current liabilities
as shown in the balance sheet at the beginning and the ending of a specific
period.
CONCEPT OF FUND
The working capital flow or fund arises when the net affect of a transaction
is to increase or decrease the amount of working capital a firm will have
same transactions that will change net working capital and same that will
cause no change in net working capital transaction which change net
working capital include most of items of the profit & loss account and those
business events which simultaneously effect both current and not current
balance sheet items. On the other based transaction, which do not increase
or decrease working capital include those which effect only current
accounts or only noncurrent accounts.

USES AND SIGNIFICANCE OF THE FUND FLOW

STATEMENT
1.A Funds Flow statement show how the resource has been obtained and
the uses to which are put it helps in analysing the financial operations.
2.It helps in determining the financial consequences of business operations.
3.It is useful in judging whether the fund has expanded at too faster rate
and whether financing is trained.
4.It points out the effectiveness with which the management has handled
working capital during the period under review.
5.The statement can assist the financial management in planning

intermediate and long-term finance to obtaining resources in the further and
determining how they are used.
6.It gives an insight into the evaluation of the present situation it provides
certain useful information about the firm financial policies to out side
world. The funds flow statement is becoming popular with the management
because it helps to explain why in spite of earn sizeable amount of profits
the company is experiencing difficulty in making payment to creditors the
rate of dividend on equity shares cannot be increased and bank balance is
getting thinner.
OBJECTION OF FUND FLOW ANLAYSIS:
1.To indicate the result of current financial position.
2.To lay emphasis on the most significant change that has taken place
during specified period.
3.To show how general expansion in business has been financed or to

describe the sources from which additional funds were derived.
4.To know the relationship between profits from operating distribution of

dividing and rating a new capital or contracting of loans.

5.To give reorganization to the fact that a business exists on flow of funds
and is not a static management
MANAGEMENT OF CASHCASH MANAGEMENT:-
Cash is the important assets for the operations of the business cash is the
basis input to keep the business running on continuous basis. Cash shortage
will disrupt the firms manufacturing operations while excessive cash will
simply remain ideas without contribution any thing towards the firm’s
profitable way .Cash management is concerned with the managing of cash
flow into and out of the firm cash flow with in the firm and cash balances
held by the firm at appoint of time by financing depict investing surplus
cash. Cash management is to obtain adequate control over cash position to
keep the firm sufficiently liquidate and to use excess cash in some
profitable way.
CASH PLANNING:-
Cash planning is technique to plan and control of the use of funds. It protect
the financial condition of them firm by developing a projected cash
statement from a forecast of plans are very crucial and developing the
overall operating plans of the firm.
USES OF CASH MANAGEMENT:-
1.It indicates company’s future financial need especially for its working
capital requirement.
2.To help to evaluate proposed capital projects.
3.It pinpoints the cash required to finance these projects as well as thecash
to be generated by the company to support them.
4.It helps to improve corporate planning.
5.Cash forecasting helps to future and to formulate projects carefully

CHAPTER 4
DATA ANALYSIS &INTERPRETATION























































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A STUDY ON WORKING CAPITAL MANAGEMENT

KLE SOCIETY’S DEGREE COLLEGE, NAGARBHAVI 1

Finance is regarded as the lifeblood of a business enterprise. This is because

In general, finance may be defined as the time it is wanted. Thus finance

Finance studies addresses the ways in the individuals, businesses, and

 The study of money and other assets

Finance is used by individuals (personal finance), by government (public

KLE SOCIETY’S DEGREE COLLEGE, NAGARBHAVI 2

According to, GUTHMANN &DONGALL "Business Finance can be

Financial management is two way process in which finances manager

it is science to earn maximum return at minimum risk and control. In

Financial management is the planning of the requirement of capital

Financial management may be defined as "Financial management is the

Financial analysis is the process of identifying, interpreting the financial

AN OVERVIEW OF FINANCIAL MANAGEMENT: The three broad

* Financial analysis, planning and control

KLE SOCIETY’S DEGREE COLLEGE, NAGARBHAVI 3

* Management of firm's assets structure

* Management of the firm's financial structure

OBJECTIVES OF FINANCIAL MANAGEMENT:

For making wise decision regarding the allocation of financial resources, a

A) Profit Maximization Approach:

B) Wealth Maximization Approach:

Wealth maximization is also known as value maximization or net present

According to Adam Smith, "wealth is defined as wealth to owners". Wealth

IMPORTANCE OF FINANCIAL MANAGEMENT IN BUSINESS

 Smooth running of the business

KLE SOCIETY’S DEGREE COLLEGE, NAGARBHAVI 4

 Determination of business success

NATURE AND SCOPE OF FINANCIAL MANAGEMENT

The scope of financial management extends to the decisions pertaining at

categorized into - financing decisions, working capital decisions, and

The finance department of the organization is responsible for the financial

WORKING CAPITAL MANAGEMENT

KLE SOCIETY’S DEGREE COLLEGE, NAGARBHAVI 5

composition of working capital mismanaged, in the dynamic business

Constantly changes in relation to the level of activity of the business

It is the task of the financial maintain an appropriate level of working

Thus efficient management of working capital in an important prerequisite

KLE SOCIETY’S DEGREE COLLEGE, NAGARBHAVI 6

DEF: The first handed information/Fresh data collected through various

In marking observations identifying problems and suggesting certain

KLE SOCIETY’S DEGREE COLLEGE, NAGARBHAVI 7

SCOPE OF THE STUDY

1.The scope is limited to operations of SRI SAI TRANSFORMERS AND

2.The period consider 2 months The scope of the study is limited to

KLE SOCIETY’S DEGREE COLLEGE, NAGARBHAVI 8

LIMITATION OF THE STUDY:

2. The study in limited 4 years (2022-2023) to (2023-2024) performance of

KLE SOCIETY’S DEGREE COLLEGE, NAGARBHAVI 9

KLE SOCIETY’S DEGREE COLLEGE, NAGARBHAVI 10

Introduction of chokes and transformer

Transformers have been pivotal since their introduction by Michael Faraday

Chokes, also known as inductors or reactors, are passive electrical

KLE SOCIETY’S DEGREE COLLEGE, NAGARBHAVI 11

KLE SOCIETY’S DEGREE COLLEGE, NAGARBHAVI 12

Transformers and chokes procedure

Manufacturing transformers and chokes can be quite an intricate process. It