05-09-2012, 01:04 PM
The Study of Working Capital Management of Design Classics Export PVT LTD
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INTRODUCTION
Corporate financial management involves investment decisions, financing decision and working capital management decisions while investment and financing decisions are concerned with long term aspect working capital decisions are short term oriented. Research in corporate finance has concentrated more on long term financial decisions rather than working capital management aspects. Further in the light of claims by corporate sector there is liquidly crunch in the recent years. A study on working capital management in companies assumes significant studies in industrial sickness and has pointed out that business failures were due to the results of shortage of working capital, efficient working capital management and had significantly affected the firm’s rise return and share price. There is a greater need so working capital management in companies viewed in this perspective this study would provide useful insight into management of working capital in corporate sector.
Working capital management refers to the management of current asset and current liabilities and the interrelationship that exists between these accounts and non current accounts. The objective of working capital management is to ensure liquidity and enhance profitability.
These twin objectives are crucial in any working capital management decision apparently. These two objectives may seem to be contradicting however one could observe that both are complementary to one another the efficiency in management of current asset contributes to ultimate profitability of the enterprise hence with a view to understand the efficiency in management of current assets and current liabilities this study was undertaken.
The study of working capital gives major importance to internal and external analysis because of its close relationship to current day to day business.
INDUSTRY PROFILE:
Textile industry is providing is one of the most basic needs of people and the holds importance; maintaining sustained growth for improving quality of life. It has a unique position as a self reliant industry, from the production of raw material to the delivery of finished products, with substantial value addition at each stage of processing; it is a major contribution to the country economy.
The Indian textile industry is one of the largest in the world with a massive raw material and textiles manufacturing base. Our country is largely dependent on the textile manufacturing and trade in addition to other major industries. About 27% of the foreign exchange earnings are on account of export of textiles and clothing alone. The textiles and clothing sector contributes about 14% to the industrial production and 3% to the gross domestic product of the country. Around 8% of the total revenue collection is contributed by the textile industry. So much so, the textile industry accounts as a large as 21% of total employment generated in the economy. Around 35 million people are directly employed in the textile manufacturing activities. Indirect employment including the manpower engaged in agricultural based raw material production like cotton and related trade and handling could be stated to be around another 60 million.
A textile industry is the largest single industry in India accounting for about 20% of the total industrial production. It provides direct employment to around 20 million people. Textile and clothing exports account of one third of the total value of exports from the country. There are 1, 2227 textile mills with a spinning capacity of about 29 million spindles. While yarn is mostly produced in the power loom and handloom sectors as well. The Indian textile industry continues to be predominantly based on cotton, which about 65% of raw material consumed being cotton. The yearly output of cotton cloth was about 12.8 billion.
Textile industries is one of India oldest industries and has a formidable presence in the economy much as it contributes to about 14% of manufacturing value addition accounts for around one third of our gross export earnings and provides gainful employment to millions of people.
Indian textile industry structure and growth:
India textile industry is one of the economy largest. In 2000-2001 the textile and garments industry accounted for about 4% of Gross domestic product, 14% of industrial output, 18% of industrial employment and 27% of exports earnings.
India textile industry is also significant in a global context ranking second to China in the production of both cotton yarn and fabric and fifth in the production of synthetic fibers and yarns.
In contrast to other major textile producing countries mostly small scale, non integrated spinning, weaving, cloth finishing, and apparel enterprises, many of which use outdated technology, characterize India textile sector.
Structure of India textile industry:
Unlike other major textile producing countries, India textile industry is comprised mostly of scale, non integrated spinning, weaving, finishing, and apparel making enterprises. This unique industry structure is primarily a legacy of government policies that have promoted labor intensive, small scale operations and discriminated against larger scale firms.
Spinning:
Spinning is the process of converting cotton or manmade fiber into yarn to be used for wearing and knitting. Largely due to deregulation beginning in the mid 1980,s. Spinning is the most consolidated and technically efficient sector in India textile industry . Average plant size remains small, however technology outdated, relative to other major producers.
COMPANY PROFILE
DESIGN CLASSICS EXPORT PVT LTD.
Design classics has evolved into a highly trusted manufacturing exporter of knitted and woven garments with a production capacity of 2, 00,000 pieces per month for children, men, and women with 300 machines and 600 workforce.
With rich experience of over two decades, Design classics continue to offer unique and high fashioned garments using most of advanced machines coupled with in-built quality systems. In Design classics, customers acquire utmost importance and they continue to remain the source of inspiration and motivation.
A renowned garment manufacturer and exporter, Design Classics has relentlessly pursued its philosophy of Growth with Excellence.
CONCLUSION:
Working capital is regarded as the life blood of the business. It is used in the day to day business operation. It measures the smooth running of business. Higher sales in comparison to working capital indicate overtrading and lower sales in comparison to working capital indicated undertaking. A higher ratio is the indication of lower investment of working capital and more profit. The working capital level should be adequate neither too high nor too low.