A PROJECT REPORT ON “WORKING CAPITAL MANAGEMENT ” AT “ SINTECH PRECISION PRODUCT LTD.” MS-office Doc.

 1.1 INTRODUCTION 

The project undertaken is on ―working capital management in SINTECH precision product ltd. It describes how the company manages its working capital and the various steps that are required in the management of working capital.

A  PROJECT REPORT ON  “WORKING CAPITAL MANAGEMENT ”

Cash is the lifeline of a company. If this lifeline deteriorates, so does the company's ability to fund operations, reinvest and meet capital requirements and payments. Understanding a company's cash flow health is essential to making investment decisions. A good way to judge a company's cash flow prospects is to look at its working capital management (WCM).

Working capital refers to the cash a business requires for day-to-day operations or, more specifically, for financing the conversion of raw materials into finished goods, which the company sells for payment. Among the most important items of working capital are levels of inventory, accounts receivable, and accounts payable. Analysts look at these items for signs of a company's efficiency and financial strength.

The working capital is an important yardstick to measure the company’s operational and financial efficiency. Any company should have the right amount of cash and lines of credit for its business needs at all times. This project describes how the management of working capital takes place at SINTECH.

1.2 INTRODUCTION TO WORKING CAPITAL

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

Working capital management precisely refers to the management of current assets. Firm 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 = CURRENT ASSETS-CURRENT LIABILITIES

There are two major concepts of working capital:

•        Gross working capital

•        Net working capital

Gross working capital:

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

Net working capital:

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 a judicious mix of long-term and short-term funds for financing current assets.

The management of working capital is important for several reasons:

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.

Working capital requires continuous day-to-day supervision. Working capital has an effect on a 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.

1.4 FEATURES OF WORKING CAPITAL MANAGEMENT:

-    Short-Term Needs: Working capital is being utilized in acquiring current assets which will be converted to cash for a short period only.

-  Circular Movement: Working capital is being converted to cash constantly which will just be turned into working capital all over again.

-  The element of Permanency: Although it is just a kind of short-term capital, working capital is needed by a business forever and always.

-  An element of Fluctuation: Working still fluctuates every now and then even if it is something permanent.

-  Liquidity: It is very liquid for it can be converted as cash at any time without losing anything.

-  Less Risky: Investments in current assets such as working capital come with less risk for it is just for the short term.

-  Special Accounting System No Needed: Since working capital is a short-term asset that will last for a year only, there will be no need for the adoption of a special accounting system.

1.5 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 the existence of the operating cycle. The lengthier the operating cycle, the 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 the same all the time, 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 increase as the firm grows and the sales become higher. Other changes are seasonal, as is the case with increased inventory required for a particular festival season. Still, others are randomly reflecting the uncertainty associated with growth in sales due to the firm's specific economic factors.

RESEARCH METHODOLOGY

2.1 RESEARCH METHODOLOGY:

Research Methodology is a way to systematically solve the research problems. In this, we study the various steps that are generally used or adopted by a researcher in studying his research problem with the logic behind them.

Researchers not only need how to apply particular research techniques but also need to mean and indicate why? The researcher also needs to understand the assumptions underlying various techniques and the criteria for the applicability of these techniques to certain problems.

2.2 NEED OF STUDY:

•        My concern topic into the study of working capital in SINTECH company. The need for working capital cannot be over-emphasized. Every business needs some amount of working capital. The need for working capital arises due to the time gap between production and the realization of cash from sales. There is an operating cycle involved in the sales and realization of cash. There are time gaps in the purchase of raw materials and production; production and sales; and sales and realization of cash.

2.3 OBJECTIVES OF THE STUDY

•        To understand the management of working capital at SINTECH.

•        To measure the financial soundness of the company by analyzing various ratios.

•        To Study the inventory and cash receivable management of the company.

•        To suggest ways for better management and control of working capital at the concern.

 2.4 SCOPE OF THE STUDY:

This project is vital to me in a significant way. It does have some importance for the company too. These are as follows –

•        This project will be a learning device for the finance student.

•        Through this project I would study the various methods of working capital management.

•        The project will be a learning of planning and financing working capital.

•        The project would also be an effective tool for the credit policies of the companies.

•        This will show different methods of holding inventory and dealing with cash and receivables.

•        This will show the liquidity position of the company and also how they maintain a particular liquidity position.

2.5 Data Collection Method:

For the purpose of this study, the data and information are based on secondary sources only. The secondary data has been collected from SINTECH LTD, the internet, etc., and the other data is collected from official records, journals,s, etc. For the fulfillment of the project on analysis statements the sources are:

1.  PRIMARY DATA:

Primary data are those which are collected for a specific purpose directly from the field of inquiry and are original in nature when the data required for a particular study can be found neither in the internal records nor in published sources, It has been necessary to collect data by conducting a first-hand investigation. The collection of primary data is a costly, time-consuming, and laborious process.

2. SECONDARY DATA:

Secondary data are such numerical information that has been collected by some agency for a specific purpose. The data can be located quickly and inexpensively.

2.6 RESEARCH DESIGN:

Research Design Meaning:

A research design is a framework or plan for a study that guides the collection & analysis of data. It is a blueprint for conducting research or completing the research study. It is that framework that keeps the research study relevant to the research problem.

Definition of Research Design:

“Research Design is the plan, structure & strategy of investigation concerned as to obtain answers to research questions.”

By Pro. F.N. Ker linger.

Types of Research Design:

There are mainly three types of research design which are as follows:

-  Exploratory Research.

-  Descriptive Research.

-  Casual Research.

Exploratory Research Design.

Exploratory research is a preliminary study of an unfamiliar problem about which the researcher has little or no knowledge. Ti means “Exploratory research is often conducted because a problem has not been clearly defined as yet, or its real scope is as yet unclear. It allows the researcher to familiarize him/herself with the problem or concept to be studied, and perhaps generate hypotheses (definition of hypothesis) to be tested.”

Exploratory Research is necessary to get initial insight into the problem for the purpose of formulating them for more precise investigation.

Hence, it is known as ‘Formulate Research’.

Example:-

It is similar to a doctor’s initial investigation of a patient suffering from an unfamiliar malady for getting some clues for identifying it. In marketing research, we use Exploratory Research to find out consumer preferences for new ideas for products & services. In marketing research, the primary objective of this research is to know how to best develop products or services or to define better relevant courses of action for existing products or services.

Descriptive Research Design.

It is a fact-finding investigation. It is more specific than an exploratory study, as its focuses on particular aspects or dimensions for formulating more sophisticated studies. Data are collected by using one or more appropriate methods: observation, interviewing, or mail questionnaire. Descriptive research or statistical research provides data about the population or universe being studied. But it can only describe the “Who, what, when, where, and how” of a situation, not what caused it. It is often Conclusive Research because it is used to help the decision-maker in determining, evaluating & selecting the best course of action.

Example:-

Market Studies: Describe the size, and buying power of consumers.

2.7 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 a shortage of time it is not possible to cover all the factors and details regarding the subject of study.

-   The latest financial data could not be reported as the company’s websites have not been updated.

Exam Studies 

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