INTRODUCTIO

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Introduction Working capital management
Working capital refers to that part of the firm’s capital which is required for
financing short- term or current assets such as cash, marketable securities,
debtors & inventories. Funds, thus, invested in current assts keep revolving
fast and are being constantly converted in to cash and this cash flows out
again in exchange for other current assets. Hence, it is also known as
revolving or circulating capital or short term capital.

Working capital management is concerned with the problems arise in

attempting to manage the current assets, the current liabilities and the inter
relationship that exist between them.

The term current assets refers to those assets which in ordinary course of
business can be, or, will be, turned in to cash within one year without
undergoing a diminution in value and without disrupting the operation of the
firm. The major current assets are cash, marketable securities, account
receivable and inventory.
Current liabilities ware those liabilities which intended at there inception to
be paid in ordinary course of business, within a year, out of the current
assets or earnings of the concern. The basic current liabilities are account
payable, bill payable, bank over-draft, and outstanding expenses.

The goal of working capital management is to manage the firm’s current

assets and current liabilities in such way that the satisfactory level of
working capital is mentioned.

Definition:-
According to Guttmann & Dougall-

“Excess of current assets over current liabilities”.

According to Park & Gladson-

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“The excess of current assets of a business (i.e. cash, accounts receivables,
inventories) over current items owned to employees and others (such as
salaries & wages payable, accounts payable, taxes owned to Government)”.
Capital required for a business can be classified under two main
categories via,

1) Fixed Capital

2) Working Capital

Every business needs funds for two purposes for its establishment and
to carry out its day- to-day operations. Long terms funds are required to
create production facilities through purchase of fixed assets such as p&m,
land, building, furniture, etc. Investments in these assets represent that part
of firm’s capital which is blocked on permanent or fixed basis and is called

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fixed capital. Funds are also needed for short-term purposes for the purchase
of raw material, payment of wages and other day – to- day expenses etc.

CONCEPT OF WORKING CAPITAL

There are two concepts of working capital:

1. Gross working capital

2. Net working capital

The gross working capital is the capital invested in the total current assets of
the enterprises current assets are those assets which can convert in to cash
within a short period normally one accounting year.

CONSTITUENTS OF CURRENT ASSETS

1) Cash in hand and cash at bank

2) Bills receivables

3) Sundry debtors

4) Short term loans and advances

5) Inventories of stock as:

a. Raw material

b. Work in process

c. Stores and spares

d. Finished goods

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 6. Temporary investment of surplus funds.

7. Prepaid expenses

8. Accrued incomes.

9. Marketable securities.

In a narrow sense, the term working capital refers to the net

working. Net working capital is the excess of current assets over
current liability, or, say:

NET WORKING CAPITAL = CURRENT ASSETS – CURRENT LIABILITIES.

Net working capital can be positive or negative. When the current

assets exceeds the current liabilities are more than the current assets.
Current liabilities are those liabilities, which are intended to be paid
in the ordinary course of business within a short period of normally
one accounting year out of the current assts or the income business.

CONSTITUENTS OF CURRENT LIABILITIES

1. Accrued or outstanding expenses.

2. Short term loans, advances and deposits.

3. Dividends payable.

4. Bank overdraft.

5. Provision for taxation, if it does not amt. to app. of profit.

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6. Bills payable.

7. Sundry creditors.

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 CLASSIFICATION OF WORKING CAPITAL

Working capital may be classified in to ways:

o On the basis of concept.

o On the basis of time.

On the basis of concept working capital can be classified as gross

working capital and net working capital. On the basis of time,
working capital may be classified as:

 Permanent or fixed working capital.

 Temporary or variable working capital

Amount of Working
Capital
Temporary capital

Permanent Capital

Time

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PERMANENT OR FIXED WORKING CAPITAL

Permanent or fixed working capital is minimum amount which is required to

ensure effective utilization of fixed facilities and for maintaining the
circulation of current assets. Every firm has to maintain a minimum level of
raw material, work- in-process, finished goods and cash balance. This
minimum level of current assts is called permanent or fixed working capital
as this part of working is permanently blocked in current assets. As the
business grow the requirements of working capital also increases due to
increase in current assets.

TEMPORARY OR VARIABLE WORKING CAPITAL

Temporary or variable working capital is the amount of working capital

which is required to meet the seasonal demands and some special
exigencies. Variable working capital can further be classified as seasonal
working capital and special working capital. The capital required to meet the
seasonal need of the enterprise is called seasonal working capital. Special
working capital is that part of working capital which is required to meet
special exigencies such as launching of extensive marketing for conducting
research, etc.

Temporary working capital differs from permanent working capital in the

sense that is required for short periods and cannot be permanently employed
gainfully in the business.

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IMPORTANCE OR ADVANTAGE OF ADEQUATE WORKING
CAPITAL

 SOLVENCY OF THE BUSINESS:

Adequate working capital helps in maintaining the solvency of the

business by providing uninterrupted of production.

 Goodwill:

Sufficient amount of working capital enables a firm to make prompt

payments and makes and maintain the goodwill.

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  Easy loans:

Adequate working capital leads to high solvency and credit standing can
arrange loans from banks and other on easy and favorable terms.

 Cash Discounts:

Adequate working capital also enables a concern to avail cash discounts

on the purchases and hence reduces cost.

 Regular Supply of Raw Material:

Sufficient working capital ensures regular supply of raw material and

continuous production.

 Regular Payment Of Salaries, Wages And Other Day TO Day

Commitments:

It leads to the satisfaction of the employees and raises the morale of its
employees, increases their efficiency, reduces wastage and costs and
enhances production and profits.

 Ability to Face Crises:

A concern can face the situation during the depression.

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FACTORS DETERMINING THE WORKING CAPITAL
REQUIREMENTS

1. NATURE OF BUSINESS:

The requirements of working is very limited in public utility

undertakings such as electricity, water supply and railways because
they offer cash sale only and supply services not products, and no
funds are tied up in inventories and receivables. On the other hand the
trading and financial firms requires less investment in fixed assets but
have to invest large amt. of working capital along with fixed
investments.

2. SIZE OF THE BUSINESS:

Greater the size of the business, greater is the requirement of working

capital.

3. PRODUCTION POLICY:

If the policy is to keep production steady by accumulating inventories

it will require higher working capital.

4. LENTH OF PRDUCTION CYCLE:

The longer the manufacturing time the raw material and other supplies
have to be carried for a longer in the process with progressive
increment of labor and service costs before the final product is
obtained. So working capital is directly proportional to the length of
the manufacturing process.

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Sources of working capital

The company can choose to finance its current assets by

1. Long term sources
2. Short term sources
3. A combination of them.

Long term sources of permanent working capital include equity and

preference shares, retained earning, debentures and other long term debts
from public deposits and financial institution. The long term working capital
needs should meet through long term means of financing. Financing through
long term means provides stability, reduces risk or payment and increases
liquidity of the business concern. Various types of long term sources of
working capital are summarized as follow:

1. Issue of shares:

It is the primary and most important sources of regular or permanent

working capital. Issuing equity shares as it does not create and burden on the
income of the concern. Nor the concern is obliged to refund capital should
preferably raise permanent working capital.

2. Retained earnings:

Retain earning accumulated profits are a permanent sources of regular

working capital. It is regular and cheapest. It creates not charge on future
profits of the enterprises.

3. Issue of debentures:

It crates a fixed charge on future earnings of the company. Company is

obliged to pay interest. Management should make wise choice in procuring
funds by issue of debentures.

Short term sources of temporary working capital

Temporary working capital is required to meet the day to day business

expenditures. The variable working capital would finance from short term

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sources of funds. And only the period needed. It has the benefits of, low cost
and establishes closer relationships with banker.
Some sources of temporary working capital are given below:

1. Commercial bank:

A commercial bank constitutes significant sources for short term or

temporary working capital. This will be in the form of short term loans, cash
credit, and overdraft and though discounting the bills of exchanges.

2. Public deposits:

Most of the companies in recent years depend on this source to meet their
short term working capital requirements ranging fro six month to three
years.

3. Various credits:

Trade credit, business credit papers and customer credit are other sources of
short term working capital. Credit from suppliers, advances from customers,
bills of exchanges, etc helps to raise temporary working capital

4. Reserves and other funds:

Various funds of the company like depreciation fund. Provision for tax and
other provisions kept with the company can be used as temporary working
capital.The company should meet its working capital needs through both
long term and short term funds. It will be appropriate to meet at least 2/3 of
the permanent working capital equipments form long term sources, whereas
the variables working capital should be financed from short term sources.
The working capital financing mix should be designed in such a way that the
overall cost of working capital is the lowest, and the funds are available on
time and for the period they are really required.

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SOURCES OF ADDITIONAL WORKING CAPITAL

Sources of additional working capital include the following-

1. Existing cash reserves
2. Profits (when you secure it as cash)
3. Payables (credit from suppliers)
4. New equity or loans from shareholder
5. Bank overdrafts line of credit
6. Long term loans

If we have insufficient working capital and try to increase sales, we can

easily over stretch the financial resources of the business. This is called
overtrading. Early warning signs include

1. Pressure on existing cash

2. Exceptional cash generating activities. Offering high discounts for clear
cash payment
3. Bank overdraft exceeds authorized limit
4. Seeking greater overdrafts or lines of credit
5. Part paying suppliers or there creditor.
6. Management pre occupation with surviving rather than managing.

Different Aspects of Working Capital Management

 M anagement of Inventory
Management of Receivables/Debtors
Management of Cash
Management of Payables/Creditors

MANAGEMENT OF INVENTORY

Inventories constitute the most significant part of current assets of a large

majority of companies. On an average, inventories are approximately 60%
of current assets. Because of large size, it requires a considerable amount of
fund. The inventory means and includes the goods and services being sold
by the firm and the raw material or other components being used in the
manufacturing of such goods and services.

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Nature of Inventory:

The common type of inventories for most of the business firms may be
classified as raw-material, work-in-progress, finished goods.

Raw
 material:
it is basic inputs that are converted into finished products
through the manufacturing process. Raw materials inventories
are those units which have been purchased and stored for future
productions.

Work–in–process:

Work-in-process is semi-manufactured products.
They represent products that need more work before them
become finished products for sale.

Finished
 goods:
These are completely manufactured products which are
ready for sale. Stocks of raw materials and work-in-process
facilitate production, while stock of finished goods is required
for smooth marketing operations. Thus inventories serve as a
link between the production and consumption of goods.The
levels of three kinds of inventories for a firm depend on the
nature of business. A manufacturing firm will have
substantially high levels of all the three kinds of inventories.
While retail or wholesale firm will have a very high level of
finished goods inventories and no raw material and work-in-
process inventories.

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So operating cycle can be known as following:-

Raw Material

Work in
Progress

Cash Collection
from
Debtors Sales
Finished Goods

Credit Cash Sales

Sales

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Need to hold inventories

Maintaining inventories involves trying up of the company’s funds and

incurrence
of storage and holding costs. There are three general motives for holding
inventories:

Transactions Motive: IT emphasizes the need to maintain inventories to

facilitate smooth production and sales operation.

Precautionary Motive: It necessitates holding of inventories to guard

against the risk of unpredictable changes in demand
and supply forces and other factors.

Speculative Motive: It influences the decision to increase or reduce

inventory levels to take advantage of price
fluctuations.

Management of Receivables/Debtors

The Receivables (including the debtors and the bills) constitute a significant
portion of the working capital. The receivables emerge whenever goods are
sold on credit and payments are deferred by customers. A promise is made
by the customer to pay cash within a specified period. The customers from
whom receivable or book debts have to be collected in the future are called
trade debtors and represents the firm’s claim or assets. Thus, receivable is s
type of loan extended by the seller to the buyer to facilitate the purchase
process. Receivable Management may be defined as collection of steps and
procedure required to properly weight the costs and benefits attached with
the credit policy. The Receivable Management consist of matching the cost
of increasing sales (particularly credit sales) with the benefits arising out of
increased sales with the objective of maximizing the return on investment of
the firm.

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Nature

The term credit policy is used to refer to the combination of three decision
variables:

1. Credit standards: It is the criteria to decide the type of customers to

whom goods could be sold on credit. If a firm has more
slow –paying customers, its investment in accounts
receivable will increase. The firm will also be exposed
to
higher risk of default.

2. Credit terms: It specifies duration of credit and terms of payment by

Customer Investment in accounts receivable will be high
if customers are allowed extended time period for
making payments.

3. Collection efforts: It determine the actual collection period. The lower

the collection period, the lower the investment in
accounts receivable and vice versa.

Management of Cash

Cash management refers to management of cash balance and the bank

balance and also includes the short terms deposits. Cash is the important
current asset for the operations of the business. Cash is the basic input
needed to keep the business running on a continuous basis. It is also the
ultimate output expected to be realized by selling the service or product
manufactured by the firm. The term cash includes coins, currency, and
cheque held by the firm and balance in the bank accounts.

Factors of Cash Management:

Cash management is concerned with the managing of

1. Cash flows into and out of the firm
2. Cash flows within the firm and
3. Cash balance held by the firm at a point of time by financing deficit or

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investing surplus cash. Sales generate cash which has to be disbursed out.
The surplus cash has to be invested while deficit has to borrow. Cash
management seeks to accomplish this cycle at a minimum cost and it also
seeks to achieve liquidity and control.

Motives of holding cash

A distinguishing feature of cash as an asset is that it does not earn any

substantial return for the business. Even though firm hold cash for following
motives:

Transaction motive:
Precautionary motive
Speculative motives
Compensatory motive

Transaction motive: This refers to the holding of cash to meet routine cash
requirement to finance. The transactions, which a
firm carries on in the ordinary course of business.

1.Precautionary motive: This implies the needs to hold cash to meet

unpredictable contingencies such as strike, sharp increase
in raw materials prices. If a firm can borrow at short
notice to pay them unforeseen contingency, it will need
to maintain relatively small balances and vice-versa.

2. Speculative motives: It refers to the desire of the firm to take advantage

of opportunities which present themselves at unexpected
movements and which are typically outside the normal
course of business.

3. Compensatory motive: Bank provides certain services to their client free

of cost. They therefore, usually require client to keep
minimum cash balance with them to earn interest and
thus compensate them for the free service so provided.

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Management of Payables/Creditors

Creditors are a vital part of effective cash management and should be

managed carefully to enhance the cash position. Purchasing initiates cash
outflows and an over-zealous purchasing function can create liquidity
problems. Consider the
Following:

Who authorizes purchasing in our company-is it tightly managed or

spread among a number of people?
Are purchase quantities geared to demand forecasts?
Do we use order quantities which take account of stock-holding and
purchasing costs?
Do we know the cost to the company of carrying stock?
Do we have alternative source of supply?
How many of ours suppliers have a returns policy?
Are we in a position to pass on cost increases quickly through price
increase?

MANAGEMENT OF WORKING CAPITAL

Management of working capital is concerned with the problem that

arises in attempting to manage the current assets, current liabilities.
The basic goal of working capital management is to manage the
current assets and current liabilities of a firm in such a way that a
satisfactory level of working capital is maintained, i.e. it is neither
adequate nor excessive as both the situations are bad for any firm.
There should be no shortage of funds and also no working capital
should be ideal. WORKING CAPITAL MANAGEMENT POLICES
of a firm has a great on its probability, liquidity and structural health
of the organization. So working capital management is three
dimensional in nature as

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1. It concerned with the formulation of policies with regard to
profitability, liquidity and risk.

2. It is concerned with the decision about the composition and level

of current assets.

3. It is concerned with the decision about the composition and level

of current liabilities.

WORKING CAPITAL ANALYSIS

As we know working capital is the life blood and the centre of a

business. Adequate amount of working capital is very much essential
for the smooth running of the business. And the most important part is
the efficient management of working capital in right time. The
liquidity position of the firm is totally effected by the management of
working capital. So, a study of changes in the uses and sources of
working capital is necessary to evaluate the efficiency with which the
working capital is employed in a business. This involves the need of
working capital analysis.

The analysis of working capital can be conducted through a number of

devices, such as:

1. Ratio analysis.

2. Fund flow analysis.

3. Budgeting.

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METHODS OF WORKING CAPITAL ANALYSIS

There are so many methods for analysis of financial statements but RIL
LTD used the following techniques:-

 Comparative size statements

 Trend analysis
 Cash flow statement
 Ratio analysis
A detail description of these methods is as follows:-

COMPARATIVE SIZE STATEMENTS:-

When two or more than two years figures are compared to each other than
we called comparative size statements in order to estimate the future
progress of the business, it is necessary to look the past performance of the
company. These statements show the absolute figures and also show the
change from one year to another.

TREND ANALYSIS:-
To analyze many years financial statements RIL LTD uses this method. This
indicates the direction on movement over the long time and help in the
financial statements.

Procedure for calculating trends:-

1. Previous year is taken as a base year.
2. Figures of the base year are taken 100.

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 3. Trend % are calculated in relation to base year.
CASH FLOW STATEMENT:-

Cash flow statements are the statements of changes in the financial position
prepared on the basis of funds defined in cash or cash equivalents. In short
cash flow statement summaries the cash inflows and outflows of the firm
during a particular period of time.

Benefits for the RIL LTD:-

 To prepare the cash budget.
 To compare the cash budgets .
 To show the position of the cash and cash equivalents.

RATIO ANALYSIS:-

Ratio analysis is the process of the determining and presenting the

relationship of the items and group of items in the statements.

Benefits of ratio analysis to RIL LTD:-

1. Helpful in analysis of financial statements.

2. Helpful in comparative study.

3. Helpful in locating the weak spots of the RIL LTD.

4. Helpful in forecasting.
5. Estimate about the trend of the business.
6. Fixation of ideal standards.
7. Effective control.
8. Study of financial soundness.

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Types of ratio:-

 Liquidity ratio: They indicate the firms’ ability to meet its current

obligation out of current resources.

• Current ratio:- Current assets / Current liabilities

• Quick ratio:- Liquid assets / Current liabilities
Liquid assets =Current assets – Stock -Prepaid expenses

 Leverage or Capital structure ratio: This ratio discloses the firms

ability to meet the interest costs regularly and long term solvency
of the firm.
• Debt equity ratio:- Long term loans / Shareholders funds
or net Worth
• Debt to total fund ratio:- Long terms loans/ share holder
funds +long term loan
• Proprietary ratio:- Shareholders fund/ shareholders
fund+long term loan

 Activity ratio or Turnover ratio:- They indicate the rapidity with

which the resources available to the concern are being used to

produce sales.

• Stock turnover ratio:- Cost of good sold/Average stock

(Cost of good sold= Net sales/ Gross profit,
Average stock=Opening stock+closing stock/2)
• Debtors turnover ratio:- Net credit sales/ Average debtors

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 +Average B/R
• Average collection period:- Debtors+B/R /Credit sales per

(Credit sales per day=Net credit sales of the year/365)

• Creditors Turnover Ratio:- Net credit purchases/ Average

Creditors + Average B/P
• Average Payment Period: - Creditors + B/P/ Credit
purchase per day.

• Fixed Assets Turnover ratio:- Cost of goods sold/Net

fixed Assets
(Net Fixed Assets = Fixed Assets – depreciation)
• Working Capital Turnover Ratio:- Cost of goods sold/
Working Capital
(Working capital= current assets – current liability)

 Profitability Ratios or Income ratios:- The main objective of

every business concern is to earn profits. A business must be able
to earn adequate profit in relation to the risk and capital invested in
it.

• Gross profit ratio:- Gross profit / Net Sales * 100

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 (Net sales= Sales – Sales return)

• Net profit Ratio:- Net profit / Net sales * 100

(Operating Net Profit= operating net profit/ Net Sales *100
or operating Net profit= gross profit – operating expenses)

• Operating Ratio :- Cost of goods sold + Operating

expenses/Net Sales * 100
(Cost of goods sold = Net Sales – Gross profit, Operating
expenses = office & administration expenses + Selling &
distribution expenses + discount + bad debts + interest on
short term loans)

• Earning per share(E.P.S.) :- Net Profit – dividend on

preference share / No. of equity shares

• Dividend per share (D.P.S.):- Dividend paid to equity

share Holders / No. of equity shares *100.

• Dividend Payout ratio(D.P.) :- D.P.S. / E.P.S. *100

26
COMPANY
PROFILE

27
 "Growth has no limit at Reliance. I keep revising my
vision.
Only when you can dream it, you can do it."

Dhirubhai H. Ambani
Founder Chairman Reliance Group
December 28, 1932 - July 6, 2002

The Reliance Group, founded by Dhirubhai H. Ambani

(1932-2002), is India's largest private sector enterprise, with
businesses in the energy and materials value chain. Group's
annual revenues are in excess of US$ 44 billion. The
flagship company, Reliance Industries Limited, is a Fortune
Global 500 company and is the largest private sector
company in India.

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Reliance enjoys global leadership in its businesses, being the largest
polyester yarn and fibre producer in the world and among the top five to ten
producers in the world in major petrochemical products.

Major Group Companies are Reliance Industries Limited (including main

subsidiary Reliance Retail Limited) and Reliance Industrial Infrastructure
Limited

ABOUT TELECOM INDUSTRY

World telecom industry is an uprising industry, proceeding towards a goal

of achieving two third of the world's telecom connections. Over the past few
years information and communications technology has changed in a
dramatic manner and as a result of that world telecom industry is going to be
a booming industry. Substantial economic growth and mounting population
enable the rapid growth of this industry. The world telecommunications
market is expected to rise at an 11 percent compound annual growth rate at
the end of year 2010. The leading telecom companies like AT&T,

29
Vodafone, Verizon, SBC Communications, Bell South, Qwest
Communications are trying to take the advantage of this growth. These
companies are working on telecommunication fields like broadband
technologies, EDGE(Enhanced Data rates for Global Evolution)
technologies, LAN-WAN inter networking, optical networking, voice over
Internet protocol, wireless data service etc.

Economical aspect of telecommunication industry: World telecom industry

is taking a crucial part of world economy. The total revenue earned from this
industry is 3 percent of the gross world products and is aiming at attaining
more revenues. One statistical report reveals that approximately 16.9% of
the world population has access to the Internet.

Present market scenario of world telecom industry: Over the last couple of
years, world telecommunication industry has been consolidating by allowing
private organizations the opportunities to run their businesses with this
industry. The Government monopolies are now being privatized and
consequently competition is developing. Among all, the domestic and small
business markets are the hardest.

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 INDIAN OVERVIEW

Today the Indian telecommunications network with over 375 Million

subscribers is second largest network in the world after China. India is also
the fastest growing telecom market in the world with an addition of 9- 10
million monthly subscribers. The teledensity of the Country has increased
from 18% in 2006 to 33% in December 2008, showing a stupendous annual
growth of about 50%, one of the highest in any sector of the Indian
Economy. The Department of Telecommunications has been able to provide
state of the art world-class infrastructure at globally competitive tariffs and
reduce the digital divide by extending connectivity to the unconnected areas.
India has emerged as a major base for the telecom industry worldwide. Thus
Indian telecom sector has come a long way in achieving its dream of
providing affordable and effective communication facilities to Indian
citizens. As a result common man today has access to this most needed
facility.

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 ABOUT RELIANCE INDUSTRIES LIMITED

MISSION & VISION

“Continuously innovate to remain Partners in human progress by
Harnessing science & technology in the petrochemicals domain”

OUR MISSION

“Be a globally preferred Business associate with responsible

Concern for ecology, society, and stake holder’s value”.

VALUES & QUALITY POLICY

OUR VALUES

“Integrity, Respect for People, Unity of Purpose, Outside-in Focus,

Agility and Innovation”.

QUALITY POLICY

“Bare committed to meet customers’ requirements through

continual improvement Of our quality management systems. We
shall sustain organizational excellence through visionary
leadership and innovative efforts”.

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 RIL MILESTONE

YEAR EVENTS
1969 IPCL was incorporated under company act.
1970 Construction of our first Petrochemicals complex commenced at
Vadodara, Gujarat.
1973 Commenced commercial operation at Vadodara.
1992 Initial public offering and listing on the Vadodara stock exchange
1992 Second Petrochemical Complex commenced at Nagothane,
Maharashtra
1996 Third Petrochemical Complex commenced at Gandhar
1999 Gandhar complex commissioned.
2000 Completion of the second phase of the Gandhar complex
2002 Reliance took over IPCL.
2004 Amendment agreement between the government and the strategic
partner, Reliance petroleum limited, a Reliance group company.
2005 Government of India withdrew its nominee directors from the
board of directors of India petrochemicals co. ltd.
2006 Amalgamation of six polyester companies i.e. Apollo fibres ltd,
Central India ploysters ltd, India polyfibres ltd, Orissa polyfibres
ltd, Recron synthetics ltd and Silvassa industries Pvt ltd with
IPCL.
2007 RIL complete a landmark acquisition of IPCL.
2008 RIL signed MOU with GAIL(INDIA) Ltd. to explore
opportunities of setting of petrochemical plants.

Products & Brands

The Company expanded into textiles in 1975. Since its initial public offering
in 1977, the Company has expanded rapidly and integrated backwards into
other industry sectors, most notably the production of petrochemicals and
the refining of crude oil.

33
The Company from time to time seeks to further diversify into other
industries. The Company now has operations that span from the exploration
and production of oil and gas to the manufacture of petroleum products,
polyester products, polyester intermediates, plastics, polymer intermediates,
chemicals and synthetic textiles and fabrics.

The Company's major products and brands, from oil and gas to textiles are
tightly integrated and benefit from synergies across the Company. Central to
the Company's operations is its vertical backward integration strategy; raw
materials such as PTA, MEG, ethylene, propylene and normal paraffin that
were previously imported at a higher cost and subject to import duties are
now sourced from within the Company. This has had a positive effect on the
Company's operating margins and interest costs and decreased the
Company's exposure to the cyclicality of markets and raw material prices.
The Company believes that this strategy is also important in maintaining a
domestic market leadership position in its major product lines and in
providing a competitive advantage.

The Company's operations can be classified into four segments namely:

• Petroleum Refining and Marketing business

• Petrochemicals business
• Oil and Gas Exploration & Production business
• Others

The Company has the largest refining capacity at any single location.

The Company is:

• Largest producer of Polyester Fibre and Yarn

• 4th largest producer of Paraxylene (PX)

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 • 5th largest producer of Polypropylene (PP)
• 7th largest producer of Purified Terephthalic Acid (PTA) and Mono
Ethylene Glycol (MEG)

Manufacturing Facilities
Reliance Industries Limited operates world-class manufacturing facilities
across the country at Allahabad, Barabanki, Dahej, Hazira, Hoshiarpur,
Jamnagar, Nagothane, Nagpur, Naroda, Patalganga, Silvassa and Vadodara.

Allahabad Manufacturing Division is located in Allahabad, Uttar Pradesh. It

is equipped with batch polymerization and continuous polymerization
facilities.

Barabanki Manufacturing Division is located near Lucknow, Uttar Pradesh.

It manufactures Black Fibre.

Dahej Manufacturing Division is located near Bharuch, Gujarat. It

comprises of an ethane / propane recovery unit, a gas cracker, a caustic
chlorine plant and 4 downstream plants, which manufacture polymers and
fibre intermediates.

Hoshiarpur Manufacturing Division is located in Hoshiarpur, Punjab. It

manufactures a wide range of PSF, PFF, POY and polyester chips.

Hazira Manufacturing Division is located near Surat, Gujarat. It comprises

of a Naptha cracker feeding downstream fibre intermediates, plastics and
polyester plants.

Jamnagar Manufacturing Division is located near Jamnagar. It comprises of

a petroleum refineries and associated petrochemical plants. The refineries

35
are equipped to refine various types of crude oil (sour crude, sweet crude or
a mixture of both) and manufactures various grades of fuel from motor
gasoline to Aviation Turbine Fuel (ATF). The petrochemicals plants
produces plastics and fibre intermediates.

Nagothane Manufacturing Division is located in Raigad, Maharashtra. It

comprises of an ethane and propane gas cracker and five downstream plants
for the manufacture of polymers, fibre intermediates and chemicals.

Nagpur Manufacturing Division is located in Nagpur, Maharashtra. It

manufactures polyester filament yarn, dope-dyed specialty products of
different ranges, fully drawn yarn and polyester chips.

Naroda Manufacturing Division is located near Ahmedabad, Gujarat, is

RIL’s first manufacturing facility. This synthetic textiles and fabrics
manufacturing facility manufactures and markets woven and knitted fabrics
for home textiles, synthetic and worsted suiting and shirting, ready to wear
garments and automotive fabrics.

Patalganga Manufacturing Division is located near Mumbai, Maharashtra. It

comprises of polyester, fibre intermediates and linear alklyl benzene
manufacturing plants.

Silvassa Manufacturing Division is located in the Union Territory of Dadra

and Nagar Haveli. It manufactures a wide range of specialty products such
as Recron Stretch, Linen Like, Melange, Thick-n-thin and Bi-shrinkage
yarns.

Vadodara Manufacturing Division is located in Vadodara, Gujarat. It

comprises of a Naptha cracker and 15 downstream plants for the
manufacture of polymers, fibres, fibre intermediates and chemicals.

36
Each of these complexes has world class manufacturing facilities.

INOVATIONS OF RIL

For those who study innovative organizations Reliance Industries will be a

shining example of how innovation is practised in almost everything that
they do. Here are few things that set them apart:

• "Impossible is an inspiring word" - Nothing turns on the leadership

at Reliance Industries than this magical word. Again to quote the
Jamnagar example, it was considered impossible to turn a barren land
into a greenbelt. Today mangoes grown in Jamnagar are sold in
Harrods London.

• "Hands on thinking, hands off execution." - It is characteristic of

Reliance leadership. They think everything through and meticulous
planning is their hall mark. When it comes to execution empowerment

37
 delegation down to the last employee in the chain is clearly
demonstrated.

• "First time it is learning. Second time it is a mistake." - Mistakes

are never frowned upon; instead they are treated as a learning
opportunity. It is one such mistake converted to learning that created
the world's largest 'Craft Centre' located at Jamnagar. Cumulatively it
has trained 1, 50,000 workmen - electricians, welders, carpenters.

• "Sense of urgency" - Reliance speed is legendary now. Reliance has

mastered project management skills and has made it virtually into a
fine art. It is this sense of speed that restored operations in record time
in Jamnagar, Patalganga and Hazira after being affected by cyclones
and floods.

"Hard work, timely decisions, speed and ingenuity" says one of the senior
managers of Reliance Industries to sum up what Reliance is all about.

It is evident that Reliance Industries is where it is today because of

Innovation in thinking and execution. Given its ambition for India and its
own organization Reliance leadership has now taken on a major initiative in
the innovation domain.

38
 OBJECTIVES
OF
THE STUDY

OBJECTIVES OF STUDY

39
 • Find out Ratios related to working capital management of RIL and
compare with last 5 years.
• Find deviation of calculated from standard or Norms.
• To study the customer preference towards reliance communications as
compared to its competitors namely Airtel, Vodafone, Idea, Tata
Docomo.
• To suggest measures to improve its market share and positioning.

SCOPE OF STUDY

The scope of this study is to provide an insight into concept of working

capital management and illustrate it by actually working capital management
of RIL. This study also provides insight of the customer preference of
Reliance Communications and its market share as compared to Airtel,
Vodafone, Idea, Tata Docomo

40
 RESEARCH
METHODOLOG
Y

41
RESEARCH METHODOLOGY

For every comprehensive research a proper research methodology is

indispensable & it has to be properly conceived. The methodology adopted
by me is as follows:-

RESEARCH PROBLEM

 To know the working capital management of RIL with the help of

ratio analysis.
 To analyze the market strength of reliance communications.

HYPOTHESIS OF THE STUDY

A research hypothesis is the statement created by a researcher when they

speculate upon the outcome of a research or experiment.
For the study of customer preference towards Reliance Communications the
following hypothesis was set up.
• H0: There is no significant relationship between factors and
satisfaction level.
• H1: There is significant relationship between factors and satisfaction
level.

42
RESEARCH DESIGN
According to Clifford Woody, “research comprises defining and redefining
problems, formulating hypothesis or suggested solutions; collecting,
organizing and evaluating data; making deductions and reaching
conclusions; and at last carefully testing the conclusions to determine
whether they fit the formulating hypothesis.
This research is divided in two parts:
(i) Working Capital Management through secondary data based on
certain parameters;
(ii) an exploratory research based on a survey of the concerning
literature. A sample survey was conducting with the help of
Scheduling Method of collecting data i.e. personally the
enumerator visited and got the questionnaires filled from the
respondents. The enumerator in this method helps the respondents
in recording their answers to various questions in the said
schedules.

SOURCES OF DATA
There are two types of data viz. primary and secondary. The primary data
are those which are collected afresh and for the first time, and thus happen to
be original in character.
The secondary data, on the other hand, are those which have already been
collected by someone else and which have already been passed through the
statistical process.

43
For this research report, primary data was collected through questionnaires
from customers and recharge dealers of sector 8 and 9 and there was no bias
on the part of the enumerator while selecting the sample for the analysis
concerning Reliance Competitors.
Secondary data was used for the working capital management of RIL that is
company annual reports, profit and loss account and balance sheet for the
years 2004-05, 2005-06, 2006-07, 2007-08, 2008-09, brochures from
recharge dealers, magazines and newspapers.

SAM
PLE SIZE
For this research, in part one, a sample size of annual reports for 5 years
2004-05, 2005-06, 2006-07, 2007-08, 2008-09 were taken.
For the second part, a sample size of 100 respondents was taken out of the
total customers using mobile phones.

SAMPLE AREA

The sample area was Bhopal involved respondents coming to recharge

dealers in sector 8 and 9 and the residents of sector 8.

STATISTICAL TOOLS USED

The various statistical tool used were data distribution tables, graphs and pie
charts. Ratio analysis was used for determining the working capital
management of RIL. Hypothesis testing through Chi Square test was used in
Customer Preference Towards Reliance Communications.

44
 LIMITATIONS OF THE STUDY

Following were the limitations of the study:

 Time was limited.
 The sample size of 100 is very small and more than that could not be
possible.
 The study was only based on the survey of respondents in
CHANDIGARH and no other area could be undertaken for the survey
due to lack of transport and time.
 This of working capital management is based solely upon the annual
reports of the company in hard copy and through company website.
Only 5 companies could be compared for the market analysis in order to
avoid complexity of data.

45
 DATA
COLLECTION

46
Types of data collection

There are two types of data collection methods available.

1. Primary data collection
2. Secondary data collection

1) Primary data collection method

The primary data is that data which is collected fresh or first hand, and for
first time which is original in nature. Primary data can collect through
personal interview, questionnaire etc. to support the secondary data.

2) Secondary data collection method

The secondary data are those which have already collected and stored.
Secondary data easily get those secondary data from records, journals,
annual reports of the company etc. It will save the time, money and efforts
to collect the data. Secondary data also made available through trade
magazines, balance sheets, books etc.
This project is based on primary data collected through personal interview of
head of account department, head of SQC department and other concerned
staff member of finance department. But primary data collection had
limitations such as matter confidential information thus project is based on
secondary information collected through five years annual report of the
company, supported by various books and internet sides. The data collection
was aimed at study of working capital management of the company

47
Data analysis
&
Interpretation

48
 (WORKING CAPITAL MANAGEMENT OF RIL)

 CURRENT RATIO

It is also known as “working capital ratio” .It is a measures of short-term

financial strength of the business and shows whether the business will be
able to meet it’ s current liabilities as when they mature.

Current Assets including assets which can be converted in to cash easily

and itself like market securities debtors, inventory, prepaid expenses etc.
Current Liabilities included creditors, bills payable, accrual expenses, short
term bank loan, income tax liabilities and long term debt maturity in current
year. In short it can be said as all obligation within a year are included in
current liabilities.
Current ratio is a measure of the firm’s short term solvency. It indicate the
availability of current assets in rupee of current liabilities. As a conventional
rule, a current ratio should be or slightly more. It focuses the strong of weak
position of the company.

49
For the year:

2008 - 09 = Rs. 58746.07 = 1.61:1

Rs. 35756.98

2007 - 08 = Rs. 51488.87 = 2.19:1

Rs. 23417.51

2006 - 07 = Rs. 29913.35 = 1.77:1

Rs. 16865.53

2005 - 06 = Rs. 24574.45 = 1.96:1

Rs. 12563.50

2004 - 05 = Rs. 28452.51 = 2.14:1

Rs. 13283.95

50
 YEARS CURRENT RATIO

2008-09 1.61:1

2007-08 2.19:1

2006-07 1.77:1

2005-06 1.96:1

2004-05 2.14:1

RATIO

2.5
INTERPRETATION:

It is generally believed that 2:1 ratio shows a comfortable working capital

position. The tendon committee appointed by RBI had wide recommended a
current ratio of 2:1.
Company has maintained this ration and increased it year by year. A current

2
ratio is 1.61 in the current year. But in the other year the ratio is nearer to 1:2

51
1
so we can say that the company having comfortable working capital
position.

 ACID-TEST RATIO

The measure of absolute liquidity may be obtained only cash and bank
balance as well as only ready marketable security with liquid liabilities. This
is every existing standard of liquidity and it is satisfaction if the ratio is
1.50:1.

For the year:

2008 - 09 = Rs. 58746.07 – 20109.61 = 1.08:1

Rs. 35756.98

2007 - 08 = Rs. 51488.87 - 19126.14 = 2.19:1

Rs. 23417.51

2006 - 07 = Rs. 29913.35 – 12136.51 = 1.38:1

52
 Rs. 16865.53

2005 - 06 = Rs. 24574.45 – 10119.82 = 1.15:1

Rs. 12563.50

2004 - 05 = Rs. 28452.51 – 7412.88 = 1.58:1

Rs. 13283.95

YEARS ACID-TEST RATIO

2008-09 ACID-TEST RATIO 1.08:1
1.8 2007-08 1.38:1
1.6
2006-07 1.05:1
ACID-TEST RATIO

1.4
1.2 2005-06 1.15:1
1
0.8
2004-05 1.58:1
ACID-TEST
RATIO
0.6
0.4
0.2
0
2008-09 2007-08 2006-07 2005-06 2004-05
YEARS

INTERPRETATION:

Acid-test ratio is near to one in current year that is 1.08 as compare to 1.38
in the previous year. Over all the acid-test ratio of last five year is very
satisfactory so we can conclude that the absolute liquidity of the Reliance
Industries Limited is in favor.

 DEBTORS TURNOVER RATIO

53
This ratio shows the proportion of sales to average receivables. It shows the
efficiency of the collection policy of the firm. The higher the ratio, the less
satisfactory position of the firm. Higher ratio indicates weak collection
policy of the firm.

For the year:

2008 - 09 = Rs. 151224.01 = 31.21:1

Rs. 4844.97

2007 - 08 = Rs. 137146.66 = 22.60:1

Rs. 6068.30

2006 - 07 = Rs. 111692.72 = 29.92:1

Rs. 3732.42

2005 - 06 = Rs. 81211.33 = 19.50:1

Rs. 4163.62

2004 - 05 = Rs. 66051.30 = 16.82:1

Rs. 3927.81

54
 YEARS DEBTORS TURNOVER
RATIO
2008-09 31.21:1
2007-08 22.60:1
2006-07 29.92:1
2005-06 19.50:1
2004-05 16.82:1

DEBTORS TURNOVER RATIO

35
DEBTORS TURNOVER

30
25
RATIO

20 DEBTORS TURNOVER
15 RATIO
10
5
0
2008-09 2007-08 2006-07 2005-06 2004-05

YEARS

INTERPRETATION:

We know that the higher Debtor’s turnover ratio is not good for the firm. In
the year 2008-09 it is 31.21:1 but in the previous year it was 22.60:1. So
some improvement is needed.

55
  CREDITOR’S TURNOVER RATIO :
Creditor’s turnover ratio shows the proportion of purchase to account
payable number of days within which we make payment to our creditors for
credit purchases estimated the creditors ratio if this ratio is higher it means
company has to check whether company is making payment within credit
period available. If it is making payment before the due date means the
company is not taking full advantage of it credit period and if company
making the payment the period that indicates that the company is not taking
the benefit of discount allowed.

For the year:

2008 - 09 = Rs. 118961.16 = 3.33:1

Rs. 35756.98

2007 - 08 = Rs. 108270 = 4.62:1

Rs. 23417.51

2006 - 07 = Rs. 92301.09 = 5.47:1

Rs. 16835.53

2005 - 06 = Rs. 69043.43 = 5.49:1

Rs. 12563.50

2004 - 05 = Rs. 52715.92 = 3.96:1

Rs. 13283.95

56
 YEARS CREDITOR’S TURNOVER RATI
2008-09 3.33:1
2007-08 4.62:1
2006-07 5.47:1
2005-06 5.49:1
2004-05 3.96:1

CREDITOR’S TURNOVER RATIO

5.47 5.49
6
4.62
5 3.96
4 3.33
3
2 CREDITOR’S
TURNOVER
1
RATIO
0
2008- 2007- 2006- 2005- 2004-
09 08 07 06 05

YEARS

INTERPRETATION:

Higher Ratio of creditor turnover forces the company to check that payment
is made with in credit period properly or not. The creditors’ turnover ratio is
3.33 in 2008-09 as compare to 2007-08 the ratio is 4.62 which is higher than
the other years.

57
  INVENTORY TURNOVER RATIO

This ratio is also known as “stock turnover ratio”. The number of times the
average stock is turnover during the year is known as stock turnover. It is
computed by deciding the sales by the inventory. The ratio is important in
joining the ability of management which it can move the stock.

For the year:

2008 - 09 = Rs. 151224.01 = 7.51 times

Rs. 20109.61

2007 - 08 = Rs. 137146.66 = 7.17 times

Rs. 19126.14

2006 - 07 = Rs. 111692.72 = 9.20 times

Rs. 12136.51

2005 - 06 = Rs. 81211.33 = 8 times

Rs. 10119.82

2004 - 05 = Rs. 66051.30 = 8.91 times

Rs. 7412.88

58
 YEARS INVENTORY TURNOVER RATIO

2008-09 7.51 times

2007-08 7.17 times
2006-07 9.20 times
2005-06 8.00 times
2004-05 8.91 times
INVENTORY TURNOVER

INVENTORYTURNOVERRATIO

10
9.2
8 8
RATIO

7.51 7.17
6

0
2008-09 2007-08 2006-07 2005-06
YEARS

INVENTORYTURNOVER RATIO

INTERPRETATION:

Higher the ratio more profitability the business would be. The ratio is
joining the ability of management with which it can move the stock.
Inventory turnover ratio is highest in the year 2006-07 is 9.20 as compare to
the other year but in current year it is 7.51 which is little lower than previous
year but it is obvious that in heavy industries like Reliance Industries
Limited have lower ration as compare to FMCG.

 NET WORKING CAPITAL TURNOVER RATIO

59
Net working capital turnover ratio is obtained by net working capital joining
to sales. The excess of current assets over current liabilities is called
working capital. It is found for measuring firm liquidity. It also measures the
firm potential reserve of funds.

For the year:

2008 - 09 = Rs. 151224.01 = 5.83 times

Rs. 19874.06

2007 - 08 = Rs. 137146.66 = 5.57 times

Rs. 24622.18

2006 - 07 = Rs. 111692.72 = 9.85 times

Rs. 11334.95

2005 - 06 = Rs. 81211.33 = 10 times

Rs. 8119.97

2004 - 05 = Rs. 66051.30 = 5.83 times

Rs. 11320

60
YEARS WORKING CAPITAL TURNOVER RATIO
2008-09 7.60 times
2007-08 5.57 times
2006-07 9.85 times
2005-06 10.00 times
2004-05 5.83 times

WORKING CAPITAL TURNOVER RATIO

2004-05 5.83

2005-06 10
WORKING
YEARS

CAPITAL
2006-07 9.85
TURNOVER
RATIO
2007-08 5.57

2008-09 7.6
WORKING CAPITAL
TURNOVER RATIO

INTERPETATION:

As per the balance sheet data of the creditor the working capital turnover
ratio is different for the different years. The ratio is 7.60 in 2008-09 and 5.57
in 2007-08 but the best favorable ratio is in 2005-06 which is 10 times. So it
means that higher the ratio better the working capital condition of the
company.

61
  DEBTOR COLLECTION PERIOD

The Debt Collection shows the number of days taken to collect the debts of
credit sales. It shows the efficiency and collection policy of the company.
The ratio is computed by dividing the Debtor’s turnover ratio in to 365
days.

For the year:

2008 - 09 = 365 days = 11 days

31.21
2007 - 08 = 365 days = 16.15 days
22.60
2006 - 07 = 365 days = 12.20 days
29.92
2005 - 06 = 365 days = 18.71 days
19.50
2004 - 05 = 365 days = 21.70 days
16.82

62
 YEARS DEBTORS COLLECTION PERIOD

2008-09 11.00 days

2007-08 16.15 days
2006-07 12.20 days
2005-06 18.71 days
2004-05 20.71 days

INTERPRETATION:

The collection period is highest in 2004-05 is 20.71 days as compare to very

low in 2008-09 is only 11 days. This shows the improvement in collection
policy of the Reliance Industries Limited. So it is very important for any
company to collect the debs which this company do very well.

STATEMENT OF RATIO ANALYSIS

63
RATIOS 2008-09 2007-08 2006-07 2005-06 2004-05

Current ratio 1.64 2.19 1.77 1.96 2.14

Acid-test ratio 1.08 1.38 1.05 1.15 1.58

Debtor’s turnover ratio 31.21 22.60 29.92 19.50 16.82

Creditor’s turnover ratio 3.33 4.62 5.47 5.49 3.96

Inventory turnover ratio 7.51 7.17 9.20 8.00 8.91

Net-working capital turnover 7.60 5.57 9.85 10.00 5.83

ratio
Debt collection period 11 16.15 12.20 18.71 21.70

C O M P R E H E N S IV E A N A L Y S IS

35
30
25
VALUES

20
15
10
5
0
Current

Debtor’s
Acid-test

turnover
turnover

Inventory

working
turnover
Creditor’s

collection
capital
turnover
ratio

Net-
ratio

period
ratio

ratio

Debt
ratio

R A T IO S

2 0 0 8 -0 9 2 0 0 7 -0 8 2 0 0 6 -0 7 2 0 0 5 -0 6 2 0 0 4 -0 5

TABLE 1

64
 CONSUMER PREFERENCE TOWARDS CELL PHONE SERVICE
PROVIDERS

S.NO NAME OF THE SERVICE NUMBER OF

PROVIDER RESPONDENTS
1 Reliance Communications 49
2 Airtel 54
3 Vodafone 61
4 Idea 23
5 Tata Docomo 39

INTERPRETATION:
• Most of the Respondents prefer Vodafone followed by Airtel,
Reliance Communications, Tata Docomo and Idea respectively.
• The number of respondents are more than 100 because of multiple
responses by the respondents.

65
 TABLE 2
SERVICE PREFERENCE OF RESPONDENTS ON THE BASIS
OF AGE WISE
CLASSIFICATION

S.NO NAME OF THE SERVICE UPTO 20 years. 21-30

years
PROVIDER
NO. OF % OF NO. OF % OF
RESPOND RESPON RESPON RESPON
ENTS DENTS DENTS DENTS
1 Reliance Communications 8 32 21 33.8

2 Airtel 9 36 19 30.2
3 Vodafone 6 24 21 33.87
4 Idea 2 8 0 0
5 Tata Docomo 0 0 1 1.6
TOTAL 25 100 62 100

31-40 years 40 years and Above TOTAL

NO. OF % OF NO. OF % OF NO. OF % OF

RESPONDE RESPONDEN RESPONDEN RESPONDEN RESPOND RESPO
NTS TS TS TS ENTS NDENT
S

1 16.67 2 28.57 32 32

2 33.33 4 57.14 34 34

3 50 1 14.29 31 31

0 0 0 0 2 2

0 0 0 0 1

6 100 7 100 100 100

66
INFERENCE:
• Among respondents upto 20 years of age group, majority of them (i.e.
36%) are using Airtel folllowed by Reliance users(32%).
• Consumers in the age group of 21 – 30 years 57% of respondents are
mostly prefer Vodafone and Reliance(33.8% and 33.87%
respectively) and 30% of the respondents are using Airtel.
• 50% of customers are using Vodafone, who are in the age group of 31
– 40 years.
• 41 and above – 57% of the respondents are using Airtel and 28.57%
of respondents are using Reliance.

67
 TABLE 3
COMPOSITION OF RESPONDENTS ON THE BASIS OF
MARITAL STATUS

S.NO. MARITAL NUMBER OF % OF

STATUS RESPONDENTS RESPONDENTS
1. MARRIED 33 33
2 UNMARRIED 67 67
TOTAL 100 100

INFERENCE:

The married respondents are using cell phones in 33%, but the unmarried
respondents are using cell phones in 67%.

TABLE 4

68
 COMPOSITION OF RESPONDENTS ON THE BASIS OF
EDUCATION QUALIFICATION

S.NO. EDUCATIONAL NUMBER OF % OF

QUALIFICATION RESPONDENTS RESPONDENTS
1. UPTO HIGHER 32 32
SENIOR
SECONDARY
2 GRADUATES 61 61
3 PROFESSIONALS 7 7
4 OTHERS 0 0
TOTAL 100 100

INFERENCE:
The majority of the respondents 62.50% (graduates) are using cell phones
and 30.77% (upto HSC) respondents are using cell phones
TABLE 5

69
 COMPOSITION OF RESPONDENTS ON THE BASIS OF
OCCUPATION

S.NO. OCCUPATION NUMBER OF % OF RESPONDENTS

RESPONDENTS

1. BUISNESS 12 12

2 PROFESSIONAL 2 2

3 EMPLYOEE 33 33

4 HOME MAKER 8 8

5 STUDENT 44 44

6 OTHERS 1 1

TOTAL 100 100

INFERENCE:
44% of the total sample who are students are using cell phones, followed by
employees (33%), businessmen (8%), home makers (8%) and others (1%).
TABLE 6
TABLE SHOWING SOURCE OF INFORMATION TO SELECT
SERVICE PROVIDERS

70
S.NO. OCCUPATION NUMBER OF % OF RESPONDENTS
RESPONDENTS

1. Family Members 40 40

2 Neighbours 2 2

3 Relations 5 5

4 Friends 37 37

5 Advertisement 4 4

6 Dealers 6 6

7 Others 6 6

TOTAL 100 100

INFERENCE:
The most influencing factor for choosing the service provider according to
the respondents is Family Members (40%) followed by Friends (37%),
Dealers and Others (6% both), Relations (5%), Advertisement (4%) and
Neighbours (2%).

TABLE NO: 8

71
COMPOSITION OF RESPONDENTS ON THE BASIS OF PURPOSE
OF PURCHASE OF THE CELL PHONES

S.NO. PURPOSE NUMBER OF % OF

RESPONDENTS RESPONDENTS

1. For Business 42 42

2 For Personal 58 58

TOTAL 100 100

INFERENCE:

42% of respondents are using cell phones for their business, and 58% of
respondents are using cell phones for their personal usage.

TABLE 10

AWARENESS OF VARIOUS SCHEMES

72
S.No VARIOUS AWARE UNAWARE TOTAL
SERVICES NO.OF % OF NO.OF % OF NO.OF % OF
RESPON RESPON RESPON RESPON RESPOND RESPONDEN
DENTS DENTS DENTS DENTS ENTS TS
1 SCHEME OF 61 61 39 39 100 100
INITIAL
PURCHASE
2 BALANCE 63 63 37 37 100 100
OF TALK
CHARGES
3 PERIODICA 58 58 42 42 100 100
L
OFFERS
4 CALL 61 61 39 39 100 100
WAITING
AND CALL
DIVERTING
OPTION
5 MODES OF 54 54 46 46 100 100
PAYMENT

INFERENCE:

73
63% of respondents are aware about the talk charges, 58% of respondents
are aware about various periodical offers and 39 % are unaware of call
waiting and call diverting option.
46% of respondents are unaware about the modes of payment and 61% of
respondents only aware about the schmes of initial purchase

TABLE NO: 11
INFLUENCING FACTORS TO SELECT THE SERVICE PROVIDER

74
S.NO. FACTORS NUMBER OF
RESPONDENT

1. Deposit Amount 13

2 Brand Image 45

3 Availability 10

4 Credit Facility for Connection 8

5 Customer Care Service 17

6 Service Charges 7

TOTAL 100

INFERENCE:
45% of respondents are purchasing a particular service provider by its Brand
Image, 17% of respondents are choosing the particular service provider by
their customer care service, 13% by Deposit Amount, 10% by Availability,
8% by Credit Facility for Connection and 7% by Service Charges.

TABLE NO: 12

75
CONSUMER’S SATISFACTION LEVEL ON THE BASIS OF PRICE
OF THE CELL PHONE PROVIDERS

S.N SERVICE HIGHLY SATISFACTO NON TOTA

O PROVIDER SATISFACTO RY SATISFACTO L
RY RY
1 Reliance 28 12 9 49
Comunicatio
ns
2 Airtel 30 20 4 54
3 Vodafone 38 13 10 61
4 Idea 10 5 13 38
5 Tata 14 7 3 24
Docomo

INFERENCE:
38% of the respondents are highly satisfied for the price of Vodafone
followed by Airtel, reliance Communications, Tata Docomo and Idea
respectively. People using Idea service are not satisfied in majority out of
the total number of respondents using Idea service.
TABLE NO: 13
CONSUMER’S SATISFACTION LEVEL ON THE BASIS OF AFTER
SALES SERVICE OF THE SERVICE PROVIDER

76
S.N SERVICE HIGHLY SATISFACTO NON TOTA
O PROVIDER SATISFACTO RY SATISFACTO L
RY RY
1 Reliance 31 12 6 49
Comunicatio
ns
2 Airtel 45 5 4 54
3 Vodafone 39 12 10 61
4 Idea 9 5 14 38
5 Tata Docomo 15 6 3 24

INFERENCE:
Majority of the respondents (45) are highly satisfied about after sales service
by Airtel, followed by Vodafone, Reliance, Tata Docomo and Idea
respectively. 12 (Reliance users) and 5 (Airtel users) are satisfied (average)
by the after sales service. 14 respondents of total Idea users are dissatisfied
by the after sales service whereas only 6 and 4 users of Reliance and Airtel
are dissatisfied.

TABLE NO 15
CONSUMER’S ATTITUDE TOWARDS THE IMPORTANCE OF
CELL PHONES

77
 CALCULATION OF SATISFACTORY SCORES
S.NO. NATURE NUMBER OF %age OF
RESPONDENTS RESPONDENTS
1 Necessity 64 64
2 Status 25 25
3 Luxury 11 11
TOTAL 100 100

INFERENCE:
64% of the respondents state that cell phones are necessity, 25% state cell
phones as a status symbol and 11% of respondents are only states that cell
phones are luxury.

TABLE 16

REASONS FOR FACING DIFFICULTY IN CELL PHONE

CONNECTION
REASONS NO. OF RESPONDENTS

78
Coverage 42

Service 32

Clarity 45

Network Busy 56

INFERENCE:

Majority of respondents face difficulty in their cell phone connection due to

Network problem followed by Coverage problem, clarity and Service.

79
OBSERVATIO
NS
&
FINDINGS

OBSERVATIONS & FINDINGS

80
Findings of working capital management of RIL
• The company having comfortable working capital position.
• The absolute liquidity of the Reliance Industries Limited is in favour.
• The collection policy of the company is very good.
• The creditors turnover ratio is 3.33 in 2008-09 as compare to 2007-08
the ratio is 4.62 which is higher than the other years.
• Inventory turnover ratio is highest in the year 2006-07 is 9.20 as
compare to the other year but in current year it is 7.51 which is little
bit lower than previous year but it is obvious that in heavy industries
like Reliance Industries Limited have lower ratio as compared to
FMCG.

• The working capital ratio is 7.60 in 2008-09 and 5.57 in 2007-08 but
the best favorable ratio is in 2005-06 which is 10 times. So it indicates
better working capital condition of the company.

• This is an improvement in collection policy of the Reliance Industries

Limited.

FINDINGS FOR RELIANCE COMMUNICATIONS

81
 (CUSTOMER PREFERENCE)

 On the basis of consumer preference, majority of the peoples are

preferred Vodafone and Reliance at the 3rd position.

 On the basis of age group, most of the respondents (33.8%), are using
Reliance, who are in the age group of 21-30 years.
 On the basis of marital status mostly unmarried respondents are using
cell phones than married respondents.
 On the basis of educational qualification, most of the graduates are
using cell phones.
 On the basis of occupation, the students and employees are using cell
phones in more level.
 On the basis of family income, 45% of the respondents are using cell
phones, who are all get family income of Rs.5, 001 – 10, 000.
 Majority of the peoples choose the service provider by family
members influence.
 4% of respondents are only influenced by advertisements.
 Majority of the peoples are using cell phones for personal usage.
 Majority of the peoples are using prepaid scheme.
 Majority of the people are aware of the various schemes provided by
the service providers.
 Majority of the people keep in mind the brand image before selecting
their service provider.
 Majority of the respondents are highly satisfied about the price of
Airtel

82
 People using Idea service are not satisfied in majority out of the total
number of respondents using Idea service.
 On the basis of after sales service, the majority of the respondents are
highly satisfied in Airtel, Vodafone and Reliance respectively.
 On the basis of periodical offers, majority of the people are highly
satisfied by Vodafone and Reliance respectively.
 On the basis of consumer’s attitude, majority of the people are states

that cell phones are necessity to all.

 Reasons for facing difficulty in cell phone connection are Network
problem followed by Coverage problem, clarity and Service.

83
CONCLUSION
&
SUGGESTION

84
 CONCLUSION

In the present study I have analyzed the working capital management of RIL
INDUSTRY Limited.
The study involves practical and conceptual over view of decisions
concerning current assets like cash and bank balance ,inventories( like raw
materials ,w-i-p,finished goods ),sundry debtors, loans and advances, other
current assets and current liabilities like sundry creditors, securities and
other deposits, other current liabilities and provisions of RIL. Was with the
objective of maximizing the overall net profit of the bank. And complete
synchronization and co ordination among the working capital components
which shall contribute to optimum level of operations. Mismanagement of
each or any of these components shall be detrimental to the objectives of
efficient operation, profitability and maximization of overall value of the
bank.
The working capital limits would be considered only after the project
nearing completion and after ensuring control over the inventory. The
inventory is a great concern for RIL and it need proper procurement and
management.
Eligible working capital limits would be assessed by cash Budget method
And Projected production method depending the market condition, scale of
operation, nature of activity/enterprise and duration/length of operating
cycle etc.

This study also attempts to find out the satisfaction of consumer regarding
cell phone service providers. This is an information era significance of
information cannot be over emphasized.

85
This decade, most of the peoples using cell phones. So, service providers are
increasing in more level increasing the level of competition. This leads to
adding new features, schemes, periodical offers to their service and the
consumers get maximum benefit from their service provider.
Now-a-days, cell phones are very necessity to all. Because, it is give safety
to the men and women also. They have also become a status symbol for
young geeration.
But one should also not forget the disadvantages of cell phones and should
try avoiding it especiaaly for children as it hampers their development
mentally and can endager their health. Crimes are also increasing relating to
cell phones and people should be careful

86
 SUGGESTIONS

The recommendation & suggestion for effective management of working

capital at RIL are given bellow:
1) For inventory, in order to improve the position, RIL can reduce the level
of stocks by resorting to phased production i.e. producing according to
requirement and disposing off or recycling the unserviceable inventories.
However, the low turnover of stock may also be due to problems with
generation of sales. Inventory management is a great concern for RIL
especially stores and spares. The purchase manager should take proper steps
for procurement of inventories.

2.) The company must take certain steps to decrease the working capital
cycle. One way can be better management of inventories.

3.) RIL is suggested to maintain a balance in capacities, synchronization of

various inputs availability of some materials or parts which are not easily
available.

4.) Short term credit period availed must be reduced and sundry creditors
should be paid faster.

5.) It should maintain inventory at an optimum level rather than a very

optimistic level.

6.) The procurement for materials requisition processing should be reduced

so as to minimize the lead time.

7.) Freedom should be there in deciding the credit policies, cash discount or
credit ratings.

8). RIL can also consider negotiating its creditors for relaxing the debt
repayment period and repaying only on or just before the expiry of the credit
period.

87
The recommendation & suggestion for effective management of working
capital at RIL are given bellow:
• Reliance Comm. should expand their customer base. But it also has an
advantage over Tata Docomo and Idea.
• Reliance Comm. should try to attract old people also.
• It should concentrate on good advertisements for their service
because, advertisements take little part for influencing the consumers.
• It should try to increase post paid users.
• More awareness of their services should be spread to the customers.
• Reliance should attract the customers by reducing their price.
• Reliance should try to increase their after sales services and decrease
their dissatisfied customers by providing good after sales services.
• Reliance should give more periodical offers to its customers.
• It should come up with more reasonable and attractive plans for
business use.
• It needs to focus on providing good clarity of signals as customers
prefer Airtel in terms of signal clarity.

88
BIBLIOGRAPHY

89
BIBLIOGRAPHY
• www.ril.com

• http://www.ril.com/html/investor/financials.html

• Annual Report for the year 2008-2009

• Annual Report for the year 2007-2008

• Annual Report for the year 2006-2007

• Annual Report for the year 2005-2006

• Annual Report for the year 2004-2005

• http://www.studyfinance.com/lessons/workcap/

• http://en.wikipedia.org/wiki/Working_capital

• www.rcom.co.in

• www.trai.gov.in

• http://www.ibef.org/industry/telecommunications.aspx

Financial Management Khan & in

Financial Management I.M.Pandey

Research Methodology C.R.Kothari

90
ANNEXURE

91
QUESTIONNAIRE

I am DINESH SHARMA, a student of MILLENNIUM Institute of

tech. & science, Bhopal and this questionnaire is a part of my
research on “A STUDY OF WORKING CAPITAL
MANAGEMENT OF RELIANCE INDUSTRY & CUSTOMER
PREFERENCE TOWARDS RELIANCE COMMUNICATION”.
I would therefore request you to give your response to the
questionnaire.

• Name :

• Sex :
Male Female

• Age :
Upto 20 yrs 21-30 yrs
31-40 yrs 40 yrs. and above

• Marital Status :
Married Unmarried

92
 Q1. What is the qualification Educational Qualification?
Up to HSC Graduation
Professional
Others _____________________________________

Q2. What is your occupation ?

Business Professional
Employee Student
Home maker others

Q3. what is your Family income (Per/month)

Less than Rs.5, 000/-

Rs. 5,000/- to 10,000/-
Rs. 10,000/- to 15,000/-
Above Rs. 15, 000/-

Q4.) Which cell phone (Service Provider) do you possess?

Reliance Communications Airtel

Vodafone Tata Docomo

93
 Idea

Q5.) Who influenced you to by the particular cell phone service

Provider?

Family Member Neighbors Relations

Friends Advertisement
Dealers

Q6.) Why do you buy the cell phones?

For business for personal

Q7) Which type of scheme is most preferable by you?

Prepaid Postpaid

Q8) If you have postpaid / prepaid connection mention scheme Name &
Monthly rental
Charges?
________________________________________________

94
Q9) Are you aware of the following details relating in your connection?
(Pre / Postpaid connection)

SCHEME AWARE UNAWARE

Scheme of Initial Purchase

Balance of Talk Charges

Periodical Offers
Call Waiting and Call Diverting
Option

Modes of Payment

Q10) What factor influenced you to decide your Cell Phones service?

Deposit amount Brand Image

Availability Credit facility for your connection
Customer care service Service charges

Q11) Are you satisfied with your cell phone service provider?
HIGHLY SATISFACTORY NOT
SATISFACTORY SATISFACTORY
Price
After Sales
Service
Periodical
Offers

Q12) You consider mobile as a:

95
 Necessity Status Luxury

Q10.) What are the reasons of difficulty you face in you cell phone
connection (if any)?

Coverage
Service

Clarity
Network Busy

THANKING YOU

96