ACKNOWLEDGEMENT

It was a great opportunity for us to work with the Hoping Minds Company , Mohali. I am
extremely grateful to all those who have shared their expertise and knowledge with me and
without whom the completion of this project would have been virtually impossible.

Firstly I would like to thank my Company Mentor Mr. Shobbit who has been a constant
source of inspiration for me during the completion of this project. He gave us all the valuable
inputs during our endeavor to complete this project.

At last I would like to thank all the respondents met in the preparation, who gave their
valuable time to provide me required information and their honest support to complete my
project.

1
 STUDENT DECLARATION
This is to state that the project report titled “A study on “WORKING CAPITAL
MANAGEMENT” is based on original work carried out by me under the supervision of the
MR. SHOBBIT towards partial fulfillment of the Degree Master Of Commerce.

Name :Sushil Kaur

Mcom 3rd

Roll No : 23030010

TEACHER DECLARATION

As A Mentor And Guide For The project Titled “A Study On Working Capital
Management” I Ms.Manprret Kaur Here By Declare That I have Guidance And

2
Supervision To the Student , Sushil Kaur. I Confirm That I Have Reviewed And Evaluated
The Progress And Content Of This Report, I Found Him To Be Sincere And Hardworking .

MS. Manpreet kaur

Assistant Professor

UICM Department

SBBSU, Khiala

Jalandhar

3
4
(THE HOPING MINDS COMPANY)

5
 AN INTRODUCTION TO HOPING MINDS

Hoping Minds providing the best opportunities to the students around the
globHoping Minds is working to transform India’s educational system into an
outcome-oriented system by helping students identify, train for and get placed in
growing career paths. We run industry-oriented, holistic development programs
based on real time industry requirements of our partner firms to maximize
placement outcomes and enable our students to build aspiration careers. We
have successfully run 30+ training programs PAN India covering over 10,000
students and are backed by established investors from India, UK and USA.
Hoping Minds has been established by driven young entrepreneurs with
prestigious IIT and IIM backgrounds along with combined sectoral experience of
30 years in the counseling, training, and placement ecosystem.

6
Hoping Minds is an NSDC and Swayam Plus accredited partner with course
certification and monitoring done on the Skill India Portal. We have been
awarded by the Dynamic World Education Community and are an active
participant in Kaushal Melas across India. We have the capability to run
specialized programs based on opportunities such as our recent program for Oil
& Gas field engineers in Jorhat, Assam; Electrical vehicles Design & Repair for
JBM; ongoing program for Electric Vehicle Systems, Design and SMR with Okaya;
AI programs with Net Smartz, ITBD, TCS, Chandigarh Group of Colleges, Chitkara
University, PTU, HPTU and many more.

Certification provided In
Partnership with N.S.D.C:
NSDC Certification is a prestigious
recognition for students who have
completed accredited skill-based training
programs. It validates their expertise,
demonstrating their dedication to
practical skills. This certification provides
a competitive edge in the job market,
showcasing proficiency and adherence to
industry standards. NSDC certifications
are widely accepted, unlocking rewarding
career opportunities and personal growth.

Hoping minds offers a variety

of courses to enhance your
skills:
1. Modern UI Development: ReactJS& Redux essentials
2. Beginners guide to cyber security and ethical hacking
3.Python essentials: unlocking the power of libraries
4. Block chain for beginners to experts: a detailed course
5. Next-gen mobile apps with flutter
6. Social media strategies: elevate your marketing game
7. Dual approach to logical reasoning: verbal and non-verbal insights
8. AWS cloud mastery: architecture and services
9. Data science fundamentals: R,SAS& SPSS

7
10. AL Deep dive: neural networks with keras, tensor Flow&pay Torch
11. Data interpretation and analysis mastery
12. Mastering quantitative aptitude
13. Advanced critical reasoning skills
14. Building your personal brand
15. Time mastery and peak productivity
16. Enhancing problem solving and decision making
17. Advanced communication mastery
18. Ace your interviews
19. Mastering financial derivatives: concepts and application
20. Money laundering essentials: understanding and combating illicit finances
21. Front-End fundamentals: HTML CSS & JavaScript in action

8
 MISSION AND VISION OF THE COMPANY

MISSION:

To serve our customers best by delivering technically sound and affordable business solutions
while ensuring exceptional customer support throughout the process .Delivering intelligent
and pocket-friendly software solutions. We constantly strive to create ingenious products and
deliver nothing less than the best in services with a never-ending emphasis on maintaining
quality of the processes, engineering services and products and client satisfaction.

VISION:

The vision is to bring inspiration in technology. They strive to achieve better outcomes and
client satisfaction. To be a go-to software solutions company where client's the boss. They
envision of becoming a global IT solutions leader with innovation, efficiency and
implementing ethical business strategies as our driving force.

· The organization is role model enterprise, respected globally for excellence in quality
and innovation
· They enhance stakeholder value while adhering to the code of responsible care and
ethical values
· They opt an employer of choice and preferred business partner worldwide

9
 INTRODUCTION

The project take on “WORKING CAPITAL MANAGEMENT IN HOPING MINDS,

MOHALI”. It give explanation about that how the company manages its working capital and
also describe the various steps that are required in the management of working capital in
business. Cash is the lifeline of the company and without cash a company can never survive.
Understanding a Company's cash flow health is necessary to making investment decisions
that how to invest cash in business operations. A good method to judge a company's cash
flow prospects is to look at its working capital management. Working capital refers to the
capital that is used for conducting day-to-day operations or, more importantly, for financing
the conversion of raw materials into finished goods, which the company sells for payment
and to earn profit. The most important items of working capital are inventory, accounts
receivable, and accounts payable. Analysts look at these items for measuring the company's
efficiency and financial strength. The working capital is an vital yardstick to measure the
company's operational and financial efficiency. Any company should have a right amount of
cash and lines of credit for operating its business operations at all times. This project
describes how the management of working capital takes place at Hoping Minds.
Decision relating to working capital and short-term financing are referred to as working
capital management. These involves managing the relationship between a firm's short-term
assets and its short-term liabilities. The goal of working capital management is to ensure that
the firm is able to continue its day to day operations and that it has sufficient cash flow to
satisfy both short-term debt and future operational expenses.

10
Working capital management is an essential part of financial management. It can also be
compared with long term decision making. Working capital management is an extremely
important area of consideration when selling a mid-market business. Effective working
capital management means that business owners will maintain working capital levels as low
as possible while still havingan adequate amount to run the business. At the point of sale, a
buyer will look at historical levels to determine an appropriate amount of non-cash working
capital to leave in the business post acquisition. The vendor will usually be able to remove
excess cash from the business prior to sale.

MEANING OF WORKING CAPITAL

“Working Capital is the Life-Blood and Controlling Nerve Center of a business”

The working capital management precisely refers to management of current assets. A firm's
working capital consists of its investment in current assets, which include short-term assets
such as: Cash and bank balance, Inventories, Receivables (including debtors and bills),
Marketable securities. Working capital is commonly defined as the difference between
current assets and current liabilities.

WORKING CAPITAL = CURRENT ASSETS-CURRENT LIABILITIES

There are two major concepts of working capital:

o Gross working capital

o Net working capital

o Gross working capital

It refers to firm's investment in current assets. Current assets are the assets, which can be
converted into cash with in a financial year. The gross working capital points to the need of
arranging funds to finance current assets.

· Net working capital

11
It refers to the difference between current assets and current liabilities. Net working capital
can be positive or negative. A positive net working capital will arise when current assets
exceed current liabilities. And vice-versa for negative net working capital. Net working
capital is a qualitative concept. It indicates the liquidity position of the firm and suggests the
extent to which working capital needs may be financed by permanent sources of funds. Net
working capital also covers the question of judicious mix of long-term and short-term funds
for financing current assets.

Management of Working Capital

Management uses a combination of policies and techniques for the management of working
capital. These require managing the current assets which can be broadly classified as -cash
and cash equivalents; inventories and debtors. There are also lots of short terms financing
options which are generally considered.
1) Cash management-
It indicates to the management criterion that identifies the cash balance which allows for the
business to meet day to day expenses on the other hand reduces cash holding costs.
2) Inventory Management-
It indicates to the management criterion that identifies the level of inventory which allows for
uninterrupted production but also responsible to reduces the investment in raw materials and
hence increases cash flow.
3) Debtor's Management
It indicates to the management criterion that identifies the appropriate credit policy, i.e.,
credit terms which will attract customers, like any impact on cash flows and cash conversion
cycle will be offset by increased revenue; and hence returns on capital.
4) Short Term Financing
Inventory: It is ideally financed by credit granted by the supplier, it also depends on the cash
conversion cycle, it may be necessary to utilize a bank loan or to “convert debtors to cash”
through “factoring”

Significance Of Working Capital Management

The management of working capital is important for several reasons:

12
 I. For one thing, the current assets of a typical manufacturing firm account for half of its
total assets. For a distribution company, they account for even more.

II. Working capital requires continuous day to day supervision. Working capital
has the effect on company's risk, return and share prices,

There is an inevitable relationship between sales growth and the level of current assets. The
target sales level can be achieved only if supported by adequate working capital Inefficient
working capital management may lead to insolvency of the firm if it is not in a position to
meet its liabilities and commitments.

Need for Working Capital

There is always a time gap between the sale of goods and receipt of cash. Additional
capital is required to have continuous business operations, the amount will be screwed up
in the current assets like accounts receivable, stock etc. This is mainly due to the „Cash
Cycle or Operating Cycle‟. By the time the cash is converted back to cash. The firm
needs extra funds and hence the need for working capital. If this not provided, the
business operations will be affected to a greater extent and hence this part of finance has
to be managed well.

CLASSIFICATION OF WORKING CAPITAL

Working capital can be classified as follows:

· On the basis of time

· On the basis of concept.

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TYPES OF WORKING CAPITAL NEEDS

Another important aspect of working capital management is to analyze the total working
capital needs of the firm in order to find out the permanent and temporary working
capital. Working capital is required because of existence of operating cycle. The
lengthier the operating cycle, greater would be the need for working capital. The
operating cycle is a continuous process and therefore, the working capital is
needed constantly and regularly. However, the magnitude and quantum of working capital
required will not be same all the times, rather it will fluctuate. The need for current assets
tends to shift over time. Some of these changes reflect permanent changes in the firm as
is the case when the inventory and receivables increases as the firm grows and the
sales become higher and higher. Other changes are seasonal, as is the case with increased
inventory required for a particular festival season. Still others are random reflecting the
uncertainty associated with growth in sales due to firm's specific or general economic factors.
The working capital needs can be bifurcated as:

o Permanent working capital

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 o Temporary working capital

Permanent working capital:

There is always a minimum level of working capital, which is continuously

required by a firm in order to maintain its activities. Every firm must have a minimum of
cash, stock and other current assets, this minimum level of current assets, which must be
maintained by any firm all the times, is known as permanent working capital for that firm.
This amount of working capital is constantly and regularly required in the same way as fixed
assets are required. So, it may also be called fixed working capital.

Temporary working capital:

Any amount over and above the permanent level of working capital is temporary, fluctuating
or variable working capital. The position of the required working capital is needed to
meet fluctuations in demand consequent upon changes in production and sales as a result
of seasonal changes. The permanent level is constant while the temporary working capital is
fluctuating increasing and decreasing in accordance with seasonal demands as shown
in the figure. In the case of an expanding firm, the permanent working capital line may not
be horizontal. This is because the demand for permanent current assets might be
increasing (or decreasing) to support a rising level of activity. In that case line would be
rising.

FINANCING OF WORKING CAPITAL

There are two types of working capital requirements as discussed above. They are:

15
 i. Permanent or Fixed Working Capital requirements

ii. Temporary or Variable Working Capital requirements

Therefore, to finance either of these two working capital requirements, we have long-term as
well as short-term sources.

SOURCES OF WORKING CAPITAL

Oceana tech has the following sources available for the fulfillment of its working capital
requirements in order to carry on its operations smoothly:

Banks:

These include the following banks –

Ø State Bank of India

Ø Canara Bank

Ø HDFC Bank Ltd.

Ø ICICI Bank Ltd.

Ø SocieteGenerale

Ø Standard Chartered Bank

Ø State Bank of Patiala

Ø State Bank of Saurashtra

Commercial Papers:

Commercial Papers have become an important tool for financing working capital
requirements of a company. Commercial Paper is an unsecured promissory note issued by the
company to raise short-term funds. The buyers of the commercial paper include banks,
insurance companies, unit trusts, and companies with surplus funds to invest for a short
period with minimum risk. Oceana issues Commercial Papers and had 4000 commercial
papers in the year 2006.

16
Research methods may be specified as those methods or techniques that can be used for
research conduction.

Financial techniques commonly used for Working Capital Management:-

 Correlation Analysis
 Trend Analysis
 Ratio Analysis

A. Correlation Analysis
It is defined as “the process by which two or more groups or set items may vary together
directly or inversely”.
Two variables are said to be correlated, if the change in one variable results in a
corresponding change to the other variable. That is when two variables move together, they
are said to be correlated.
Co-efficient of Correlation
It is an algebraic method of measuring correlation. This method of correlation is measured by
finding a value known as the co-efficient of correlation using an appropriate formula:-

B. Trend Analysis
Trend Analysis, also referred as Time series is the ratio which indicates the direction of
change. This analysis is important in the applicability of the items in profit and loss accounts.
For trend analysis the use of index numbers is generally adopted. The procedure which is
adopted in this analysis is to assign the number 100 for items of the base year and to calculate
percentage changes in each item of other years in relation to the base year. This procedure is
called as the “trend-percentage method”. The trend analysis within the company's ratio itself
is informative, but it is more informative when comparison is done with the company's ratio
with that industry ratio. This comparison indicates how company has been operating well
over time relative to its competitors and may also help to explain the trends in the company
ratios.

C. Ratio Analysis

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The ratio analysis is one of the most powerful tools of financial analysis. It is used as a device
to analyze and interpret the financial of enterprise. The important factor used in Ratio
Analysis is:
Current Ratio
Current Ratios signifies ratio of current assets to current liabilities. It is also called working
capital ratio.

Current Ratio= Current Assets / Current liabilities

REVIEW OF LITERATURE

Working Capital is very important for every company to meet day to day operation expenses
and urgent payments. Effective working capital increase the company profit and vice versa.
For effective working capital, collection days should be less and payment days should be
more overall cash conversion cycle days should very low or in negative.
Many researchers have studied working capital from different views and in different
environments. The following ones were very interesting and useful for our research:

Eljelly (2004) Identified the relation between profitability and liquidity who was examined,
as measured by current ratio and cash gap (cash conversion cycle) on a sample of joint stock
firms in Saudi Arabia. The study found that the cash conversion cycle was of more
importance as a measure of liquidity than the current ratio that affects profitability. The size
variable was found to have significant effect on profitability at the industry level. The results
were stable and had important implications for liquidity management in various Saudi firms.
First, it was clear that there was negative relationship between profitability and liquidity
indicators such as current ratio and cash gap in the Saudi sample examined. Second, the study
also revealed that there was great variation among industries with respect to the significant
measure of liquidity.

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Lazaridis and Tryfonidis (2006) have explored the relationship between corporate
profitability and WCM in the Athens Stock Exchange. The finding of results shows a
negative relationship between profitability and working capital indicators like days of
accounts receivable, account payable and cash conversion cycle. They concluded that the
firms can create profit by effectively handling each component of the cash conversion cycle.

Saswata Chatterjee (2010)Focused on the importance of the fixed and current assets in the
successful running of any organization. It poses direct impacts on the profitability and
liquidity. There have been a phenomenon observed in the business that most of the
companies increase the margin for the profits and losses because this act shrinks the size of
working capital relative to sales. But if the companies want to increase or improve its
liquidity, then it has to increase its working capital. In the response of this policy the
organization has to lower down its sales and hence the profitability will be affected due to
this action. For this purpose 30 United Kingdom based companies were selected which were
listed in the London Stock Exchange. The data were taken of three years 2006-2008. It
analyzed the impact of the working capital on the profitability. The dimensions of working
capital management included in this research which is quick ratios, current ratios, C.C.C.
average days of payment, Inventory turnover, and A.C.P. (average collection period) on the
net operating profitability of the UK companies.

Mohamad and Saad (2010) Used Bloomberg's database of 172 listed companies randomly
selected from Bursa Malaysia main board for five year period from 2003 to 2007. Applying
correlations and multiple regression analysis, they found that current assets to total assets
ratio shows positive significant relationship with Tobin Q, ROA and ROI. Cash conversion
cycle, current assets to current liabilities ratio and current liabilities to total assets ratio
illustrate negative significant relations with Tobin Q. ROA and ROI.

All the above studies provided us a solid base and give us idea regarding working capital
management and its components. They also give us the results and conclusions of those
researches already conducted on the same area for different countries and environment from
different aspects. On the basis of these researches done in different countries, we have
developed our own methodology for research.

19
OBJECTIVE OF STUDY :-
The objectives of this project were mainly to study the inventory, cash and receivable at
Hoping Minds, but there are some more and they are –

1. The main purpose of our study is to render a better understanding of the concept “Working
Capital Management”.
2. To understand the planning and management of working capital at Oceana tech.
3. To measure the financial soundness of the company by analyzing various ratios.

SCOPE OF THE STUDY:-

This project is important to me in a significant way. It does have some
importance for the company too. These are as follows –
1. This project will be a learning device for the finance student.
2.This will show the liquidity position of the company and also how do they maintain a
particular liquidity position.
3.Through this project I would study the various ratios of the working capital management.
4.The project will be a learning of planning and financing working capital.

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 OPERATING CYCLE CONCEPT

Working capital is the life blood of any business, without which the fixed assets inoperative.
Working capital circulates in the business, and the current assets change from to other. Cash
is used for procurement of raw materials and stores items and for payment of operating
expenses, and then converted into work-in-progress, then to finished good. When the finished
goods are sold on credit terms receivables balances will be formed. When the receivable are
collected, it is again converted into cash. The need for working capital arises because of time
gap between production of good their because of time production of good and their actual
realization after sales. This time gap is called technically called as ‘operating cycle ’or
‘working capital cycle’.

The operating cycle measures the length of time that passes between when a business orders
materials or goods and when it collects cash from the sale of the resulting goods it produces
or resells. The operating cycle (OC) starts with the buying of materials or goods; it includes
the time it takes to produce goods, in the case of a manufacturer, or to place them on the
shelf, in the case of a retailer; it accounts for the time it takes to sell the goods; and it ends
with the collecting of cash from those sales The length of an operating cycle can be very
different from one industry to the next. A supermarket, for example, has a far shorter average
operating cycle than a furniture retailer might experience.

21
 If a business is operating profitably, than in theory it should generate cash surplus. If it
doesn’t generate surplus , the business will eventually run out of cash and expire. The
operating cycle involves three phase:

1. Acquisition of resources such as raw material, labour ,power and fuel.

2. Manufacture of the product which includes conversion of raw material into work-in-
progress into finished goods.

3. Sale of the product either for cash or on credit. Credit sale create accounts receivable for
collection.

The factor a business expands the more cash it will need for working capital and investment.
Good management of working capital will generate cash, which will help improve profits and
reduce risks.

Following is the operating cycle:

22
The investment in current asset is circulating in nature. This changes the shape from raw
material to semi-finished goods, debtors and finally to cash. Thus, conversion of working
capital in to cash may result in the profit or loss. Cash thus, conversion of working capital in
to cash may result in the profit or loss. Working capital cycle consists of following five steps:

➢ Conversion of cash to raw material.

➢ Conversion of raw material into work-in-progress.

➢ Conversion of work-in-progress into finished goods.

➢ Time for sale of finished goods.(cash and credit sales)

➢ Time for realization from debtors and bills receivable into cash.

A short operating cycle is a sign of goods working capital management. Conversely a long
cash operating cycle indicate that capital is tied up which the business waits for customer to
pay.

It is quite possible for a business to have a negative cash operating cycle. I.e. receiving
payment from customer before it has pay suppliers.

Example: Typically companies, which employ just in time practices such as dell, and
companies that buy on extended credit term and sale for such as Tesco. The longer the
production process, the more cash firm must keep tied up in inventories. Similarly, the longer
it takes customers to pay their bills, the higher the value of account receivable. On the other
hand, if a firms can delay paying for its own material it may reduce the amount of cash it
needs. In simple words accounts payable reduce networking capital.

Factors Impacting Operating Cycle

An OC has many moving parts, any one of which can affect its duration. They range from
decisions made by company employees to external elements that affect the economy as a
whole. Here’s a snapshot of eight such factors.

1. Inventory Management
The goal of inventory management is to understand and properly maintain the right
amount of goods on hand. Many inventory management issues can affect the OC. For

23
 example, over-ordering raw materials for products that aren’t selling as aren’t selling
as fast as expected can lengthen the OC.

2. Sales and Marketing Strategies

If sales slow, inventory piles up and the OC gets longer. As sales accelerate, a
product’s turnover rate improves, shortening the OC. So the more effective a
business’s sales and marketing strategies, the shorter its OCs.

3. Credit Policies
A longer credit period granted to a customer means a slower OC. In turn, prolonged
collection periods can increase the chance of a business not being able to meet its own
cash commitments.

4. Supplier Relationships
The stronger the relationship between a supplier and a business, the better the
opportunity to negotiate more favorable delivery terms. Faster delivery from a
supplier shortens a business’s OC.

5. Product Type and Industry

As discussed, OC varies across industries, as well as from product to product. For
example, an operating cycle for a medical equipment manufacturer would be far
different from that of a shoemaker. But within that medical equipment OC, the
comparative time spans for syringes versus EKG machines also likely would differ. In
any industry, understanding the OC of competitors can be a useful mode of
comparison for your business.

6. Technological Advancements
Consider where in the workflow you can implement better technologies to shorten the
OC and/or streamline other parts of the business. That could be in supply chain
management, manufacturing (reducing the length of the production process),
inventory management (better alignment with demand forecasting, such as using
the just-in-time, or JIT, inventory method) and accounting software (which automates
the AR collection process and offers customers more ways to pay).

7. Economic Conditions

24
 Whether the economy as a whole or within certain sectors is in a recession or growth
period can greatly affect an OC. For example, when a period of high inflation hits,
demand for many products and services falls, which then slows inventory turnover
and can also cause customers to pay more slowly or default altogether. History shows
that there are many kinds of economic downturns, and their impact can be hard to
predict. It’s important to make your business as recession-proof as possible.

8. Company Policies and Management Decisions

Many company policies and business decisions directly impact the OC. Ideally,
policies and decisions should keep the OC as short as possible. For example, choosing
to invest in the JIT inventory model mentioned above would shorten an OC, as would
stricter credit policies and improving the efficiency of AR collections.

RESEARCH METHODOLOGY

RESEARCH DESIGN:-
A Research design is the set of methods and procedures used in collecting and analyzing
measures of the variables specified in the problem research so that the research problem is
efficiently handled. The sketch of how research should be conducted can be prepared using
research design. Research is the systematic process of collecting and analyzing data in order
to increase our understanding of the phenomenon about which we are concerned or
interested. It is the in depth search for knowledge. It is a careful investigation or inquiry
especially through search for new facts in any branch of knowledge. The study exhibits both
descriptive and analytical character. Regarding the theoretical concept it is descriptive since it
interprets and analysis the secondary data in order to arrive at appropriate conclusion, it is
also analytical in character. The interpretation of data is done based on ratio and percentage.

METHODS OF DATA COLLECTION:-

In preparing of this project the information collected from the following sources:-

v Primary Data:
The Primary data has been collected from personal interaction and discussions with the
finance manager and the other staff members of the company, Oceana tech and current
annual reports.

25
 v Secondary Data:
The major source of data for this project was collected through previous years annual reports,
Profit and Loss account, Balance Sheet, Websites, Records such as files, reports maintained
by the company of Five year period from 2014 to 2019 & some more information collected
from internet and text sources.

Research Methodology

· This project requires a detailed understanding of the concept –“Working

Capital Management”. Therefore, firstly we need to have a clear idea of what is
working capital, how it is manage in Oceana tech, what are the different ways
in which the financing of working capital is done in the company.

· The management of working capital involves managing inventories, accounts

receivable and payable and cash. Therefore one also needs to have a sound knowledge
about cash management, inventory management and receivables management.

· Then comes the financing of working capital requirement, i.e. how the working
capital is financed, what are the various sources through which it is done.

· And, in the end, suggestions and recommendations on ways for better management
and control of working capital are provided.

SOURCES OF ONLINE DATA

The data collection for the study is mainly from the secondary sources. Like

• Online reports

• Books

• Journal

• Web sites

26
Data has been obtained from published reports like the annual reports of the company,
balance sheets, and profit and loss account, booklets, records such as files, reports maintained
by the company. Mainly the annual report consists of two parts;

1) Profit and Loss Account

2) Balance Sheet

Profit and loss account reveals the income and expenditure of the company. Balance Sheet
reveals the financial position of the organization.

Calculation of Working Capital

Net working capital reflects to the difference between current assets and current liabilities. It
is a qualitative concept.
Net working capital = Current Assets - Current Liabilities

Year Current Current Net WorkingCapital

Assets Liability
2014-2015 1150 1050 100

2015-2016 1250 1000 250

2016-2017 1320 1240 80
2017-2018 1450 1200 250
2018-2019 1460 1135 325

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Interpretation
The net working capital of the company is showing a fluctuating trend for the year 2014-2015
to 2018-2019. In the year 2015-2016 company has the net working capital 250crs.
Showsincrease due to increase in the component of current assets as inventory. In the
year2016-2017 it shows a steadily decreasing trend due to increase in the sundry creditors. So
firm was not in a satisfactory position in terms of working capital during this period. Again
there is an increasing trend in working capital during the years 2017-2018 & 2018-2019.

Ratio analysis:-
1. Current Ratio of Working Capital :-
It represents the ratio of current assets to current liabilities. The current ratio is a measure of
the firm's short term solvency. Current ratio of 1:1 means that the firm can meet its current
liability. For a sound business, current ratio of 2:1 means that firm has safety margin to
overcome its current liability.
Current ratio= current asset -Current liability

Current Current Current

Year Assets Liability Ratio

2014-2015 1150 1050 1.1

2015-2016 1250 1000 1.25

2016-2017 1320 1240 1.1

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2017 -2018 1450 1200 1.2

2018-2019 1460 1135 1.3

Interpretation:-The above table deals with current ratio. The minimum standard for
current ratio is 2:1. Thoughthis company records a trend in its current ratio, as 1:1 near to the
ideal level. The company has not achieved the standard ratio 2:1 in any of the years.
Theratiois highest in the year 2018-2019. Current ratio of the company is not satisfactory
hence short term solvency of the firm is not satisfactory.
2. ACID TEST RATIO / QUICK RATIO / LIQUIDITY RATIO:-
This ratio establishes a relationship between quick/liquid assets and current liabilities. It
measures the firms' capacity to pay off current obligations immediately. An asset is liquid if
it can be converted in to cash immediately without a loss of value; Inventories are considered
to be less liquid. Because inventories normally requires some time for realizing into cash.
This ratio is also known as acid-test ratio. The standard quick ratio is 1:1. Is considered
satisfactory.

Quick Ratio = Quick Assets (current assets - Inventory)

Current Liabilities

Year Current Assets Inventories Quick Assets Current Liabilities Quick Ratio

2014-15 1130 200 930 1030 0.9

2015-16 1250 300 950 1000 0.95

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 2016-17 1320 150 1170 1240 0.94

2017-18 1450 400 1050 1200 0.88

2018-19 1460 350 1110 1135 0.98

INTERPRETATION: During the year 2014-15 the Absolute liquidity ratio was 0.9,
during the year 2015-16 it was 0.95 and in the year 2016-17 it was 0.94, in the year 2017-18
it was 0.88. This shows the Absolute liquidity ratio of the company was not satisfactory
because it is below the standard ratio. In the year 2018-19 the Absolute liquidity ratio has
increases 0.98.

3. WORKING CAPITAL TURNOVER RATIO:-

This ratio indicates the number of times the working capital is turned over in the course of
the year. This ratio measures the efficiency with which the working capital is used by the
firm. A higher ratio indicates efficient utilization of working capital and a low ratio indicates
otherwise. But a very high working capital turnover is not a good situation for any firm.

Working Capital Turnover Ratio = Net Sales

Net Working Capital

Yea Net Sales Net Working WCTR

r
Capital

2014-15 750 100 7.5 Times

2015-16 850 250 3.4 Times

2016-17 550 80 6.87 Times

2017-18 1100 250 4.4 Times 30

2018-19 1550 325 4.77 Times

INTERPRETATION:The working capital turnover ratio is fluctuating year to year that
was high in the year 2014-15, 7.50 times; there was a subsequent decrease in the year 2015-
16 and 2016-17 to 3.4 times and 6.87 times. But it increases in the year 2017-18 and 2018-19
to 4.4 and 4.77 times respectively. This shows the company is utilizing working capital
effectively.

4. ABSOLUTE LIQUID RATIO:-

Absolute liquid ratio may be defined as the relationship between Absolute liquid assets and
current liabilities. Absolute liquid assets include cash in hand and cash at bank. The standard
Ratio is 0.5:1.
Absolute Liquidity Ratio = Cash and Bank Balance
Current Liabilities

Year Cash and Current ALR

s Bank Liabilities
Balance

2014-15 200 1030 0.19

2015-16 250 1000 0.25

2016-17 340 1240 0.27

2017-18 370 1200 0.31

2018-19 400 1135 0.35 31

INTERPRETATION:-During the year 2014-2015 the Absolute liquidity ratio was 0.19,
during the year 2015-2016 it was 0.25 and in the year 2016-2017 it was 0.27, in the year
2017-2018 it was 0.31. This shows that absolute liquidity ratio increases every year but it is
below the standard ratio. In the year 2018-2019 the Absolute liquidity ratio has increases
0.35.
5. INVENTORY TURNOVER RATIO:-
Inventory turnover ratio is the ratio, which indicates the number of times the stock is turned
over i.e., sold during the year. This measures the efficiency of the sales and stock levels of a
company. A high ratio means high sales, fast stock turnover and a low stock level. A low
stock turnover ratio means the business is slowing down or with a high stock level.
Inventory turnover ratio = Net Sales
Closing inventory

Years Net Sales Closing Inventory Inventory Turnover

Ratio
2014-2015 2250 200 11.25 Times
2015-2016 3750 300 12.5 Times
2016-2017 1250 150 8.33 Times
2017-2018 5865 400 14.66 Times
2018-2019 6255 350 17.87 Times

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INTERPRETATION:-It is seen from the above chart that During the year 2014-2015
the inventory turnover ratio is 11.25 Times, in the year 2015-2016 it increased to 12.5 Times,
But in the year 2016-2017 itdecreased to 8.33 times. There was a subsequent increase in the
year 2017-2018 and 2018-2019 to 14.66 times and 17.87 times respectively. This shows the
company has more sales.
6. INVENTORY HOLDING PERIOD:-
This period measures the average time taken for clearing the stocks. It indicates that how
many days inventories take to convert from raw material to finished goods.
Inventory Holding Period = Days in a year
Inventory turnover ratio
Years Days in a year Inventory Turnover Inventory Holding
Ratio Period
2014-2015 365 11.25 32.44 Days
2015-2016 365 12.5 29.2 Days
2016-2017 365 8.33 43.82 Days
2017-2018 365 14.66 24.89 Days
2018-2019 365 17.87 20.43 Days

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INTERPRETATION:-Inventory holding period fluctuating over the years. It was 32.44
Days in the year 2014-2015. It decreased to 29.2 Days in the year 2015-2016, it increased to
43.82 Days in the year 2016-2017, there was a subsequent decrease in the year 2017-2018
and 2018-2019 to 24.89 days and 20.43 days respectively.This shows the company is
minimising these inventory-holding days thereby to increase the sales.

7. DEBTORS/ ACCOUNTS RECEIVABLES TURNOVER RATIO:-

Debtors turnover ratio indicates the speed of debt collection of the firm. This ratio computes
the number of times debtors has been turned over during the particular period.
Debtors Turnover Ratio = Net Sales
Average Debtors

Years Net Sales Average Debtors Debtors turnover

ratio
2014-2015 2250 255 8.8 Times
2015-2016 3750 570 6.58 Times
2016-2017 1250 110 11.36 Times
2017-2018 5865 550 10.66 Times
2018-2019 6255 660 9.48 Times

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INTERPRETATION:-It is clear that Debtor turnover ratio fluctuating over the years. It
was 8.8 times in the year 2014-2015. It decreased to 6.58 times in the year 2015-2016, it
again increased to 11.36 times in theyear 2016-2017, but it decreased to 10.66 times and 9.48
times in the year 2017-2018 and 2018-2019 respectively. This shows company is not
collecting debt rapidly.
8. DEBTORS COLLECTION PERIOD:-
Debtors collection period measures the quality of debtors since it measures the rapidity or the
slowness with which money is collected from them a shorter collection period implies prompt
payment by debtors. It reduces the chances of bad debts. A longer collection period implies
inefficient credit collection performance.
Average collection period = Days in a year
Debtors Turnover Ratio

Years Days in a year Debtors Turnover Debtors collection

Ratio period
2014-2015 365 8.8 41.48 Days
2015-2016 365 6.58 55.47 Days
2016-2017 365 11.36 32.13 Days
2017-2018 365 10.66 34.24 Days
2018-2019 365 6.48 56.33 Days

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INTERPRETATION:-Debt Collection period changing over the years. It was 41.48
days in the year of 2014-2015. It increased to 55.47 days in the year 2015-2016, but in the
year 2016-2017 it decreased to 32.13 days. There was a subsequent increase in the year 2017-
2018 and 2018-2019 to 34.24 days and 56.33 days respectively.This shows the inefficient
credit collection performance of the company.

9. CREDITORS/ ACCOUNTS PAYABLES TURNOVER RATIO:-

It is the ratio, which indicates the number of times the debts are paid in the year. This ratio is
calculated as follows:-
Creditors Turnover Ratio = Net Purchases
Average creditors

Years Net Purchases Average Creditors Creditors Turnover

Ratio
2014-2015 2350 335 7.01 Times
2015-2016 2765 545 5.07 Times
2016-2017 3000 420 7.14 Times
2017-2018 3740 460 8.13 Times
2018-2019 4550 560 8.13 Times

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INTERPRETATION:-It is clear that Creditor Turnover Ratio changing over the years.
It was 7.01 times in the year 2014-2015. It decreased to 5.07 times in the year 2015-2016,
there was a subsequent increase in the year 2016-2017 and 2017-2018 to 7.14 times and 8.13
times respectively. In the year 2018-2019 it is compared to 2017-2018. It shows that
company has making prompt payment to the creditors.

10. CREDITORS PAYMENT PERIOD:-

The Creditors Payment Period represents the average number of days taken by firm to pay the
creditors and other bills payables.
Average Payment Period = Days in a year
Creditors Turnover Ratio

Years Days in a year Creditors Turnover Average Payment

Ratio Period
2014-2015 365 7.01 Times 52.07 Days
2015-2016 365 5.07 Times 71.99 Days
2016-2017 365 7.14 Times 51.12 Days
2017-2018 365 8.13 Times 44.89 Days
2018-2019 365 8.13 Times 44.89 Days

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INTERPRETATION:-Average payment period changing over the years. It was 52.07
days in the year 2014-2015. It increased to71.99 days in the year 2015-2016, but in the year
2016-2017 and 2017-2018 it decreased to 51.12 days and 44.89 days respectively. In the
2018-2019 it is same as compared to 2017-2018. It indicates that the company has taken the
steps to prompt payment to the creditors.

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BALANCE SHEET OF FIVE YEARS OF HOPING MINDS, MOHALI
Rs. (in Crores)
Particulars Mar'19 Mar'18 Mar'17 Mar'16 Mar'15
Equity & Liabilities 12 Months 12 Months 12 Months 12 Months 12 Months
1. Shareholder's funds
(a) Share Capital 2178 1092 1148 1148 574

(b) Reserves & Surplus 6053 6240 6690 5995 4750

2. Non-Current Liabilities
(a) Long-term Borrowings 6547 5518 6282 3657 4560
3. Current Liabilities
(a) Creditors 560 460 420 545 335
(b) Provisions 505 436 350 236 504

(c) Other Current Liabilities 70 304 470 219 191

Total 15913 14050 15360 11800 10914

Assets

1. Non-Current Assets
(a) Machinery 7500 6800 6620 5470 3280
(-) Acc. Depreciation 2850 1990 1760 1646 1520

Net Block 4650 4810 4860 3824 1760

(b) Non-Current Investments 5000 4500 4630 3150 6840

(c) Loans and Advances 4803 3290 4550 3576 1184

FINDINGS:-

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 i. Working Capital of the Hoping Minds Pvt. Ltd. Was increasing and showing positive
working capital per year.
ii. The Hoping Minds Pvt. Ltd. Has not achieved standard ratio in term of current ratio
and quick ratio.
iii. Inventory Turnover Ratio is very low in the year 2016-2017. In the year 2017-2018 it
has increased by 6.33 times as compared to 2016-2017 and in last year 2018-2019 it
has again increased by 3.21 times as compared to 20117-2018.
iv. Debtors turnover ratio is very high in the year of 2016-2017. But it decreased in the
year of 2017-2018 by 0.7 times as compared to 2016-2017 and in the last year it has
again decreased by 1.18 times as compared to 2017-2018.
v. Creditors Turnover ratio has increased in the year of 2016-2017 and 2017-2018. It is
same in the last year 2018-2019 as compared to 2017-2018.
vi. Working capital turnover ratio is low in the year of 2017-2018. But it increased in the
last year by 0.37 times as compared to 2107-2018.

LIMITATIONS OF THE STUDY:-

We cannot do comparisons with other companies unless and until we have the data of other
companies on the same subject. Only the printed data about the company will be available
and not the back–end details. Future plans of the company will not be disclosed to the
trainees. Lastly, due to shortage of time it is not possible to cover all the factors and details
regarding the subject of study.

SUGGESTIONS AND CONCLUSIONS

Suggestions
1) The standard norm for the current ratio is 2:1. The study shows that the current ratio is not
satisfying the standard norm and from the working capital ratio, we can determine that the
company's working capital management is sufficient.
2) The study shows that the quick ratio of the company is fluctuating over the years. The
company is not satisfying the standard norm.

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3) Liquidity position of the company is satisfactory.
4) Collection period of the company is at a very low rate.
5) Creditors turnover ratio has increasing over the years. Company is making prompt
payment to its creditors. This is good sign for the company. On-time payment to suppliers
will increase the credibility of the firm. It has maintain it further to survive in the market.

Conclusion
The study was conducted to analyze the working capital management in Hoping Minds,
Mohali. The financial position of the company was analyzed and interpreted. The analysis
and interpretation of data relating to working capital management of Oceana Tech have
concluded that company requires a safe current ratio and quick ratio. The Company need to
invest in current assets. But the financial status of the company is good. The working capital
ratio of the company increased in the last years. In the last year inventory turnover ratio has
also increased. It is good sign for the company. Company is moving forward with excellent
management.

BIBLIOGRAPHY

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Ø https://www.slideshare.net>shivd>final...
Ø https://www.studocu.com/en/document/indian..
Ø https://www.academia.edu/1238114/working_...
Ø https://www.projectengineer.net/tutorials/pm...
Ø https://www.investopedia.com>terms
Ø https://www.divestopedia.com>definition

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