18-10-2012, 03:50 PM
WORKING CAPITAL MANAGEMENT
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INTRODOCTION
INTRODUCTIONS TO THE PROJECT AT ECIL
Working capital refers to the investment by a company in short–term assets such as cash, marketable securities accounts and inventories.
It is observed that , some PSU’s are loaded with high volumes of inventory leading to obsolescence with consequent to profit / loss A/C . liquidity while resulting in blockage of funds three by drastically affecting the performance of the organization. In case of ELECTRONICS CORPORATION OF INDIA LIMITED , there is variety of high tech nature not similar to each other working capital management . Hence challenge task.
Business needs funds for the purpose of its establishment and to carry out its day to day operations. Current assets and Current liabilities in a leading public sector ELECTRONICS CORPORATION OF INDIA LIMITED (under government of India). The above study is aimed at analyzing in working capital in ECIL.
In this context it is proposed to take project study in reputed public sector undertaking covering working capital are the fixed assets such as plant and machinery, land and building, furniture etc.
ECIL is chosen as it is a central public sector unit of long standing. The project study aims analyze discuss conclude and suggest measures for further controls.
The project is design to provide study of working capital in ECIL .
OBJECTIVES OF THE STUDY:
The case study of WORKING CAPITAL MANAGEMENT under taken with the following objectives.
To analyze the current assets and current liabilities with a view to point out the liability of the company.
To discuss the pattern of working capital in relation to total net asset and gross fixed asset with a view to highlight whether the company has been operating with high/low amount of working capital.
To examine the pattern of financing the working capital requirements in order to bring out the relative importance of short term/long term sources of funds.
To present the turnover of working capital and its components with a view to analyze the efficiency with which the working capital and its components were used.
To analyze the funds flow to find out the ways and means of corporation.
NEED FOR THE STUDY:
In public sector undertakings there has been increase in net profit, gross margin, gross profit, gross sales, internal resources generation, export earning and contribution to the exchequer during 2003-2004. A detailed analysis of the public sector industry wise profitability reveal that 50% of the PSU’s are loss making another 50% are highly profitable like mainly SAIL, GAIL, BALCO, HOCL, BHEL are some of the major contribution for profit.
In 2003 budget, the government has announces for revival and restructuring of the sick PSUs by allocating a budget around Rs.2000 cores. The main reason attributed for loss making due to flaws in financial aspects and indiscipline in managing the resources particularly finances.
In the 21st century the government stressed the disinvestments policies for the most of the companies including high profit earning companies. The shift of government for disinvestments has given an enormous amount of around Rs.80000 cores from this Disinvestments policy.
PUBLIC SECTORS ENTERPRISES:
Government believes that the process of disinvestments should increase competition and not decrease it, government emphasized, stressing that there should be a link between disinvestments and the provision of basic social good; government said revenues generated through disinvestments would be used for designated social sector spending.
Reiterating government’s commitment to a strong and effective public sector, government was in favor of developing full managerial and commercial autonomy to successful profit- making companies, operating in a
1. Disinvestment policy
2. Strengthen puss where appropriate in order to facilitate investment.
3. Privatization of partially puss where the units are making loss with 49% share capital of private holders
4. Treatment of chronic sick units for its revival plan for strategic industries and balance to go with private partners.
Public sectors under three categories:- `
Core sector life defense, steel, cement, ect. Related manufacturing sectors.
Second category includes those industries, which can weed out the unwanted expenditure and manpower to make the companies viable and profitable.
The third category were loss making industries which are going to be listed under, “Disinvestments policy” with a share capital of 26% or 51% to the well organized companies like Tata, Birla, Reliance etc.
As already stated above the main reason attributed, for loss making are due to flaws in financial management particularly investment appraisal and working capital management as a lot of indiscipline in managing these areas.
Hence the study of working capital management has been taken up in managing current assets and current liabilities. Arranging short term financing controlling the moment of cash, administrating, accounts receivable and monitoring investment inventories.