A

PROJECT REPORT On

WORKING CAPITAL MANAGEMENT

SRF LIMITED, MALANPUR GWALIOR FOR THE PARTIAL FULFILLMENT OF BACHELOR OF BUSINESS ADMINISTRATION (2011-2013)

Submitted To

Submitted by
KAVITA PACHORI M.B.A III Semester

JIWAJI UNIVERSITY, GWALIOR

[1]

DECLARATION

I am Kavita Pachori student of M.B A III SEM. JIWAJI UNIVERSITY, GWALIOR, hereby declare that the project report entitled WORKING CAPITAL

MANAGEMENT is an Authentic and genuine bona fide work done by me under the supervision of Mr. Santosh Pathak (Manager) at SRF Limited Malanpur (MP).The empirical findings in this report are based on imperative information assembled at SRF Ltd.

Kavita Pachori M.B.A III Sem

[2]

ACKNOWLEDGEMENT
This thesis is great source of learning, a good experience as it made me aware of professional culture and conducts that exist in the industry. Though at the onset of any ambitious thesis one always encounters certain difficulties in the beginning, however, overcoming these difficulties, completing the thesis as well as making it a success greatly depends on the encouragement, inspiration. For completion of this thesis various people have put lot of efforts. I would like to thank HOD ----------------------------- (Jiwaji University, Gwalior) for giving me an opportunity to do thesis on WORKING CAPITAL MANAGEMENT in SRF Limited. I would like to express my gratitude to Prof. Surya Prakash Parashar, (Asst. Prof. SRCEM), Mr. VIVEK VAJPAYEE , Mr. SANJAY KAPOOR (Senior Executive) for his continuous inspiration, guidance and valuable suggestion that helped me in every step.

Kavita Pachori MBA III Sem.

[3]

PREFACE
This report has been prepared towards the partial fulfillment of curriculum M.B.A. This research is on the topic of WORKING CAPITAL MANAGEMENT OF SRF LIMITED Although I had tried my level best to prepare this report an error free report every effort had been made to offer the most authenticate position with accuracy. The research provides an opportunity to a student to demonstrate application of his/her knowledge, skill and competencies required during the technical session. Research also helps the students to devote his/ her skill to analyse the problem to suggest alternative solutions, to evaluate them and to provide feasible recommendations on the provided data. This topic emphasize the importance of training need identification we can focus on the following areas if training will make a difference in productivity and the bottom line, decide what specific training each employee needs and what will improve his or her job performance, To differentiate between the need for training and organizational issues and bring about a match between individual aspirations and organizational goals.

[4]

CONTENTS

COMPANY PROFILE About SRF Milestone Theoretical Aspect Practical Aspect INTRODUCTION TOPIC Working Capital management RESEARCH METHODOLOGY Definition Types of research Data collection method Primary data Secondary data Sample Sampling method DATA ANALYSIS & GRAPHICAL PRESENTATION FINDINGS SUGGESTION CONCLUSION BIBLIOGRAPHY QUESTIONNAIRES

[5]

COMPANY PROFILE
The SRF Group The Rs 980 crore SRF Group is an Indian market leader in industrial yarn and fabric as well as refrigerant gases. Since its inception in 1974, the SRF Group has emerged as an industrial major in its core business areas, which has about 2,500 employees operating out of 14 locations in India, UAE and USA.

In its Industrial Synthetics Business, which manufactures Nylon Tyre Cord Fabric, it is the 7th largest producer in the world. The Chemicals Business manufacturers refrigerant gases used by customers in around 45 countries. Its Industrial Fabrics business is reputed for its high quality fabrics used for nontyre applications in the international and domestic market. In its Information Technology Business (ITB), SRF is offering high quality Business Process Outsourcing (BPO) solutions to international customers.

In 2001, SRF Ltd. de-merged three smaller businesses that manufacture Engineering Plastics, Fishnet Twines and Polyester Films into a separate company - SRF Polymers Ltd. This restructuring is a move towards a more focused business portfolio, which will help spearhead growth.

At SRF, our vision is to build a world class, knowledge-driven, customeroriented and process-based organisation that is committed to complete customer satisfaction, high returns for its investors, improved quality of life for its people and being an ideal corporate citizen. SRF and its people are guided by certain values and principles in their approach to work and their dealings with others. These principles are classified as work-related and people-related.

[6]

People-related Principles

Work-related Principles

Create a win/win situation for all Focus on Quality, not short-term stakeholders Leadership by example Self discipline Participation by all Continuing education for all profits Market in, not product out Be customer oriented Work with facts and data Act on causes, not just phenomena Be process oriented Prioritize

SRF PURPOSE

To be an inspired, caring and joyous organization To create extraordinary value for all To pursue excellence and customer loyalty To always meet tomorrow's challenges today

SRF VALUES

To trust and be trustworthy Show respect and care for each individual Foster creativity and innovation Live by high standards of ethics and integrity Avoid all discrimination Contribute to the benefit of society

[7]

SRF VISION

To be one of the most admired business organizations in India, deeply loved by its people, respected and sought after by its customers and shareholders.

To be World Leader in at least one of its businesses with global operations and technology leadership. To be one of the most sought after employers in the country. A Company known for its people management skills. One that can unlock the talent hidden in employees and inspire them to take on and accomplish extraordinary future challenges. Its employees must be amongst the best paid in the country.

To establish an outstanding track record of shareholder value creation by 2005. To be a shining example of deep commitment and contribution to development of people and society.

SRF MISSION

Enable customer satisfaction of a high level and a standard higher than that of competitors. Provide good returns to our shareholders and other financial stakeholders. Continuously enhance the total quality of life of our employees and help them realize their potential. Contribute to the development of the society and the nation.

[8]

SRF STRENGTHS

The company has a very strong brand image in the trade market and is perceived to be the best in its product market segments.

All major OEMs use SRFs fabric for their soft-top vehicles. The companys fabrics have been approved for defense and navy applications. The companys products are also used in niche markets like sport goods, ducting and pitch covers. All the major cricket grounds in Asia and Middle East are covered by SRF tarpaulins.

To strengthen quality, the company adopted TQM practices. World standards achieved in manning. The company achieved a significant presence in the US tarpaulin market.

QUALITY POLICY

To maintain market leadership in tyre cord in the country and to make their presence stronger in the global market, SRF Ld. (ISB-G) aim at excellence in the quality of products and customer delight beyond contractual obligations. To accomplish this, the company is committed to implement and follow Quality Management System as per ISO 9002 and strive for continuous quality improvement through team work and motivation at all levels preserving ecology and environment.

[9]

TOTAL QUALITY MANAGEMENT

At SRF, Total Quality Management is a management approach that profoundly integrates principles, methods, systems and tools, and transforms the way people in the organization think and do things, as well as the way in which they manage it.

Because of TQM, SRF has made fundamental improvements in all areas. This in turn has meant satisfied stakeholders, which is the true meaning of a win-win approach.

The TQM journey at SRF is characterized by three key methods of management. * Daily Management which is a means to preserve status quo and make continuous improvements. * Breakthrough Management which provides a method for making quantum improvements or breakthroughs. * Upstream Management - which prevents potential problems from

arising at the production stage and creates products that satisfy customers.

SRF COMMITMENTS SHAREHOLDERS:

High growth and profitability, risk reduction, good governance. Perform: Productivity, scalability, de-risking and profitability. Conform: Adherence to corporate governance code.

[10]

Inform: Sharing of information with shareholders and other investors.

PEOPLE:

Experience: Joy, culture, pride, camaraderie, challenge. Learning: Training and development to enhance skills, knowledge and personality. Contributing: Opportunity for meaningful and challenging work. Growing: Growth in responsibilities and quality of life.

CUSTOMERS:

Value Preposition superior to benchmark competition in terms of Quality, Cost, Delivery.

SOCIETY:

Compliance: with laws of the country and being a good corporate citizen. Welfare: contributing to the well being of the society we live in. Environment: care and protection of communities around our workplace.

SRF STRATEGIES

In the Industrial Synthetics Business, the company, a domestic leader with more than 40 % market share, is now seeking to consolidate Asian capacities by acquisitions and alliances, to emerge as an Asian leader. [11]

In Industrial Fabrics Business the company is striving to build on its dominance in the Indian market where its market share ranges between 75-100% in various product segments. While it will continue efforts to retain this dominant position at home, it is also exploring export markets in the US and Europe where it has already made some headway, emerging as the fifth largest player in the world in Belting Fabrics, riding on the back of its relationships with the world leaders in Conveyor Belting. The objective is to emerge as cost-competitive global suppliers to these leading companies.

In the Chemicals Business, where SRF is the Indian market leader with a market share of more than 40%, the company is seeking to consolidate on this by building its distribution networks and moving into the new-age replacement gases as some of its existing products are phased out under the Montreal Protocol. The company will also seek to focus on the after-market in these products, both in India and some countries of Asia. It is also exploring the possibility of engaging in Contract Manufacture of Custom Synthetics of Chemicals.

In the IT Business, SRF is providing high quality Business Process Outsourcing (BPO) services to international customers. Currently, the company is providing outsourcing in the areas of Healthcare, Finance & Accounts and Opportunistic Data Mining.

[12]

GROWTH PLANS

The company is now structured into four separate businesses:

A)

Industiral Synthtics Business:

SRF is a domestic leader in this business with more than 40% market share. This seeks to consolidate Asian capacity, by acquisitions and alliances, to emerge as an Asian leader. For the moment, they are seeking to protect their turf in India and would seek any capacity in Asia that would be available. B) Industrial Fabrics Business:

They are a dominant player in India, with market share ranging from 75% to 100% in their entire product segment. They seek to retain this position, and explore export markets in the US and Europe. They have made some headway, emerging as the fifth largest player in the world in Belting Fabrics, riding on the back of their relationship with world leaders in

Conveyor Belting. They now seek to emerge as cost-competitive global suppliers to these companies.

C)

Chemicals Business:

They are market leader in India, with a market share of more than 40%. They seek to consolidate on this, build their distribution networks, move into the newage replacement gases as some of their existing products are phased out under

[13]

the Montreal Protocol, and retain market leadership in those products, both in India and some countries of Asia. They are also exploring the possibility of emerging in Contract Manufacture of Custom Synthesis of Chemicals.

D)

IT Enabled Service Business:

They are testing the waters in this business. They feel that there are lot opportunities in Business Process Outsourcing and are looking at opportunities in the Medical Billing space.

SRF MILESTONES 1970 Incorporation of the Company 1974 Commissioning of Nylon Tyre Cord Fabric plant at Chennai 1977 Introduction of Fishnet Twines at Chennai 1979 Introduction of Nylon Engineering Plastics at Chennai 1981 Commissioning of Chafer and Belting Fabrics project at Tiruchirapalli, Tamil Nadu 1985 1] Takeover of Shriram Bearings Ltd., and Shriram Needle Bearing Industries Ltd.

2] Commissioning of Industrial Fabrics Plant at Tiruchirapalli 3] Substantial expansion of Nylon Tyre Cord Fabric capacity at Chennai 1986 1] Commissioning of Coated Fabrics project at Tiruchirapalli 2] Commencement of commercial production at SRF Nippondenso Ltd. 3] Commencement of operations at SRF Finance Ltd. 1989 Commencement of commercial production of Florochemicals at

[14]

Bhiwadi, Rajasthan 1993 Adoption of Total Quality Management (TQM) 1994 1] Divestment of equity in SRF Nippondenso Ltd.

2] Commencement of Halon production based on in-house R&D at Bhiwadi 3] Commencement of operations at SRF International Ltd.

1995 1] Acquisition of Ceat's Nylon Tyre Cord & Fabrics plant at Gwalior, Madhaya Pradesh

2] Commencement of Chloromethanes production at Bhiwadi towards backward integration for Fluorochemicals Incorporation of SRF Americas 3] Commencement of Vision Care Project at Bangalore 1996 Commencement of Tyre Cord Fabric production at SRF Overseas plant in Dubai 1997 Divestment of equity in SRF Finance Ltd. 1998 1] 2] Divestment Closure of of Ophthalmic SRF Lenses International business Ltd. Inc.

3] Equity rights issue taken out of Rs 43 crore 1999 1] Acquisition of DuPont Fibers Ltd, subsequently renamed Nylon Tyrecord Fabric Ltd.

2] ISO 9000 certification awarded to all SRF plants 2000 Divestment of Shriram Bearings Ltd. and Shriram Needle Bearing Industries Ltd. 2001 Capacity of Nylon Tyre Cord Fabrics doubled, SRF becomes 7th largest merchant manufacturer in the world.

[15]

2002 1]

Merger

of

Tyrecord

Fabric

Ltd.

with

SRF

Ltd.

2] Polyster Films, Fishnet Twines and Engineering Plastics businesses spun off a separate entity SRF Polymers Ltd.

LOCATIONS

[16]

ABOUT THE PLANT

This plant was established in 1990 as Tyre Cord Division of CEAT LIMITED. It was largely funded by debt, which initially strained the company, but later various policies helped it to recover from it and emerge as a domestic leader with market share exceeding 40 %. It was set up in collaboration with M/s Toray Industries, Japan. Full care was taken with respect to quality during procurement, erection and commissioning of the plant. The commercial production started in March 1993. With the endless efforts of the employees, benchmark level quality was achieved from day one and the product was well accepted in India as well as in the global market, within a short span of one year.

This unit was acquired by M/s SRF LIMITED on the midnight of 8th /9th Feb 1996. The acquisition was a watershed. Consequently the name of the company has been changed to SRF LIMITED. The company got ISO-9002 certificate on Sept. 1st 1995. Recently it has got ISO-14000 (Environment Management System ) certificate which means that work procedure and processes in plant are safe and environment friendly.

Malanpur plant has got one of the sharpest profiles in the world in terms of input-output ratio, raw materials, process productivity and operating profit etc. The ISB-G plant is fully integrated with facilities for producing Nylon Chips both conventional and Spin draw, Yarn and Fabrics. Business of industrial synthetics constitutes the largest part of SRF portfolio and will continue to grow rapidly. As a leading Indian producer of Nylon 6 tyre cord SRF now accounts for over 40% of the domestic demand for tyre cord. Tyre cord fabric is a griege fabric made from tyre yarn and dipped fabric converted from griege fabric, which has applications as reinforcement material for making all kinds of tyres. The ISB-G

[17]

plant has the capacity of producing tyre cord fabric to the extent of 8500tpa per year. There is realization at SRF that industrial activity needs to preserve and work for Environment and Ecology. The ISB-G plant has also given equal importance to both. Following steps have been taken to preserve and enrich the environment and ecology at SRF Ltd., Malanpur :-

Technology selected which is less polluting. Training people and creating full awareness in this direction. Pollution control is considered a social need instead of legal requirement. Integrated facility for Effluent Treatment and its monitoring. In house facility for Ambient and Stack monitoring. Biogas plant installed for safe disposal of canteen waste. Extensive tree plantation. There is 100% recycle of Effluent towards horticulture.

The ISB-G, Malanpur is supposed to achieve DEMING AWARD by 2004.

[18]

ISB-G, MALANPUR AT A GLANCE

MALANPUR LOCATION

INDUSTRIAL

AREA

MALANPUR, DIST. BHIND (M.P.) 22K.M. FROM GWALIOR

START- UP YEAR TECHNICAL COLLABORATER QUALITY ACCREDITATION TOTAL AREA TOTAL INVESTMENT MANPOWER WORKMEN STAFF SUPERVISOR & ABOVE

1993 M/S TORAY IND. (JAPAN) ISO 9002 & ISO 14001 73 ACRES RS. 350 CRORES

316 63 61

TOTAL

440

CAPACITY (TPA) NYLON-6 TYRE CORD CHIPS NYLON-6 TYRE CORD YARN NYLON-6 TYRE CORD FABRIC 10500 11000 8500

UTILISATION

98%

[19]

OBJECTIVE OF RESEARCH
Understand the Performance management and appraisal process of the Company.

Understand and to successfully implement the Division of Personnels Employee Working capital System.

Improve two way communication between supervisor and employees. Elucidate tasks, goals, responsibilities, priorities and expectations.

[20]

INTRODUCTION TOPIC

[21]

CONCEPTUAL FRAMEWORK WORKING CAPITAL

Working capital, also known as "WC", is a financial metric which represents operating liquidity available to a business. Along with fixed assets such as plant and equipment, working capital is considered a part of operating capital. It is calculated as current assets minus current liabilities. If current assets are less than current liabilities, an entity has a working capital deficiency, also called a working capital deficit. Net working capital is working capital minus cash (which is a current asset). It is a derivation of working capital that is commonly used in valuation techniques such as DCFs (Discounted cash flows). A company can be endowed with assets and profitability but short of liquidity if its assets cannot readily be converted into cash. Positive working capital is required to ensure that a firm is able to continue its operations and that it has sufficient funds to satisfy both maturing short-term debt and upcoming operational expenses. The management of working capital involves managing inventories, accounts receivable and payable and cash.

Definition: According to Guttmann & DougallExcess of current assets over current liabilities. According to Park & Gladson-

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 Structure
Capital Structure refers to the composition of the long-term sources of funds. It includes equity capital including retained earnings and long-term debts. Thus, short-term liabilities should be excluded from the formulation of capital structure. In a simple way, capital structure is used to represent the proportionate relationship between debt and equity. A firms capital structure is then the composition or structure of [22]

its liabilities. The capital structure of a company essentially describes the financing of the company. This can be viewed through the right side of the balance sheet which displays liabilities and shareholders equity. Many different firms of analysis, through many different financial ratios, can be performed gauge near term and long term financial health of the company.

Definitions:
According to Nemmers and Grunewald, Capital structure refers to all the financial resources marshaled by the firm, short as well as long term, and all forms of debt as well as equity. According to Gerestenbeg, Capital structure of a company refers to the composition or make-up of its capitalization and it includes all long-term capital resources viz: loans, reserves, shares and bonds.

PROFITABILITY (EBIT)
An indicator of a company's profitability, calculated as revenue minus expenses, excluding tax and interest. EBIT is also referred to as "operating earnings", "operating profit" and "operating income", as you can re-arrange the formula to be calculated as follows: EBIT = Revenue - Operating Expenses

Also known as Profit Before Interest & Taxes (PBIT), and equals Net Income with interest and taxes added back to it. In other words, EBIT is all profits before taking into account interest payments and income taxes. An important factor contributing to the widespread use of EBIT is the way in which it nulls the effects of the different capital structures and tax rates used by different companies. By excluding both taxes and interest expenses, the figure hones in on the company's ability to profit and thus makes for easier cross-company comparisons. EBIT was the precursor to the EBITDA calculation, which takes the process further by removing two non-cash items from the equation (depreciation and amortization).

REVIEW OF LITRATURE
[23]

Hyun-Han Shin and Luc Soenen (1998) has done a study on Efficiency of
Working Capital Management and Corporate Profitability Efficient working capital management is an integral part of the overall corporate strategy to create shareholder value. We investigate the relation between the firm's net-trade cycle and its profitability. This relationship is examined using correlation and regression analysis, by industry and working capital intensity. Using a Compustat sample of 58,985 firm years covering the period 1975-1994, we find, in all cases, a strong negative relation between the length of the firm's net-trade cycle and its profitability. In addition, shorter net-trade cycles are associated with higher risk-adjusted stock returns. [JEL: G30, G32, MIO]

Kaushik Chakraborty (2008) has done a study on Working Capital and

Profitability: An Empirical Analysis of Their Relationship with Reference to Selected Companies in the Indian Pharmaceutical Industry Working capital is essential for the day-to-day operations of a business, and hence it is the life-blood of any business. Working capital management is about the management of current assets and current liabilities in such a way that a satisfactory level of working capital, which maximizes the profits of the firm, is maintained. Inadequacy of working capital may lead the firm to insolvency, whereas excessive working capital implies idle funds which earn no profits. Therefore, efficient management of working capital is an integral part of the overall corporate strategy to improve corporate profitability. But in reality, controversy persists on the issue whether the working capital of a firm affects its profitability or not. Empirical studies that have been conducted in India also ended with contradictory results. Besides this, there are many intricacies in examining the influence of working capital on the profitability. Against this backdrop, this paper seeks to evaluate the relationship between working capital and profitability of 25 selected companies in the Indian pharmaceutical industry during the period 1996-97 to 2007-08. The issue has been tackled using relevant statistical tools and techniques.

[24]

J P Singh and Shishir Pandey (2008) has done a study Impact of Working Capital
in the Management Profitability of Hindalco Industries Limited For the successful working of any business organization, fixed and current play a vital role. Management of working capital is essential as it has assets a direct impact on profitability and liquidity. An attempt has been made in this paper to study the working capital components and the impact of working capital management on profitability of Hindalco Industries Limited. The paper also makes an attempt to study the correlation between liquidity, profitability and Profit Before Tax (PBT) of Hindalco. The study is based on secondary data collected from annual reports of Hindalco for the study period 1990 to 2007. The ratio analysis, percentage method and coefficient of correlation have been used to analyze the data. Multiple regressions were used to check the significant impact on the profitability of Hindalco.

Mian Sajid Nazir and Talat Afza (2009) explained Impact of Aggressive
Working Capital Management Policy on Firms Profitability The present study investigates the traditional relationship between working capital management policies and a firms profitability. Using the panel data set for the period 1998-2005, the impact of aggressive working capital investment and financing policies has been evaluated using return on assets as well as Tobins q. Managers can create value if they adopt a conservative approach towards working capital investment and working capital financing policies. The study also finds that investors give weight to the stocks of those firms that adopt an aggressive approach to managing their short-term liabilities.

MARC DELOOF (2003) has discussed Does Working Capital Management

Affect Profitability of Belgian Firms? Most firms have a large amount of cash invested in working capital. It can therefore be expected that the way in which working capital is managed will have a significant impact on the profitability of firms. Shin and Soenen (1998) find a strong negative relation between the cash conversion cycle and corporate profitability for a large sample of listed American firms for the 1975-1994 periods. In this paper, I find a significant negative

[25]

relation between gross operating income and the number of days accounts receivable, inventories and accounts payable of Belgian firms.

Debasish Sur and Kaushik Chakraborty (2011) have explained Evaluating

Relationship of Working Capital and Profitability: A Study of Select Multinational Companies in the Indian Pharmaceutical Sector In the present environment of cut-throat competition, almost all the business firms have no other option but cutting the cost of operations in order to be competitive as well as financially healthy. So, like other aspects of financial management, working capital management must have a significant role in reaching this target. However, a great deal of controversy exists over the issue whether the working capital of a firm, as determined by its financing and investment decisions, affects its profitability or not. The present study seeks to reexamine the interrelationship between working capital management and profitability of ten select multinational companies in the Indian pharmaceutical industry during the period 1996-97 to 2007-08. The selection of the companies has been made using purposive sampling procedure. Relevant statistical techniques and tests have been applied in carrying out the analysis. Although the study has failed to provide final solution to this highly controversial issue, a significant outcome has been derived from it.

Shishir Pandey and Vikas Kumar Jaiswal (2011) has done a study on
Effectiveness on Profitability: Working Capital Management For a successful working of a business organization fixed and current assets play a vital role? Management of working capital is essential as it has direct impact on profitability

and liquidity. An attempt has been made in this paper to study the working capital components and impact of working capital management on profitability of NALCO. The paper also makes an attempt to study the correlation between liquidity and profitability (PBT) of NALCO, the study is based on secondary data collected from annual reports of NALCO for the study period 1995 to 2008. Ratio analysis and percentage method and co - efficient of correlation have been used to analyze the data. Multiple regressions were used to check the significant impact on the profitability of NALCO.

[26]

Amarjit Gill, Nahum Biger, Neil Mathur (2011) explained The Effect of
Capital Structure on Profitability: Evidence from the United States The relationship between capital structure and profitability cannot be ignored because the improvement in the profitability is necessary for the long-term survivability of the firm. This paper seeks to extend Abors (2005) findings regarding the effect of capital structure on profitability by examining the effect of capital structure on profitability of the American service and manufacturing firms. A sample of 272 American firms listed on New York Stock Exchange for a period of 3 years from 2005 2007 was selected. The correlations and regression analyses were used to estimate the functions relating to profitability (measured by return on equity) with measures of capital structure. Empirical results show a positive relationship between i) short-term debt to total assets and profitability and ii) total debt to total assets and profitability in the service industry. The findings of this paper show a positive relationship between i) short-term debt to total assets and profitability, ii) long-term debt to total assets and profitability, and iii) total debt to total assets and profitability in the manufacturing industry. This paper offers useful insights for the owners/operators, managers, and lending institutions based on empirical evidence.

Michael Faulkender & Mitchell A. Petersen (2003) explained Does the

Source of Capital Affect Capital Structure? Empirical examinations of capital structure have led some to conclude that firms are under levered. Implicit in this argument and much of the empirical work on leverage is the assumption that the availability of incremental capital depends solely on the risk of the firms cash flows and characteristics of the firm. However, the same market frictions that make capital structure relevant suggest that firms may be rationed by lenders, leading some firms to appear to be under-levered relative to unconstrained firms. We examine this theory, arguing that the same characteristics that may be associated with firms being rationed by the debt markets are also associated with financial intermediaries, opposed to bond markets, being the source of a firms debt capital. We find that firms have significantly different leverage ratios based on whether they have access to public bond [27]

markets as measured by the firm having a debt rating. Although firms with a debt rating are fundamentally different, these differences do not explain our findings. Even after controlling for the firm characteristics previously found to determine observed capital structure and the possible endogeneity of having a bond rating, we find that firms which are able to raise debt from public markets have 35 percent more debt.

Kesseven Padachi (2006) has discussed Trends in Working Capital Management

and its Impact on Firms Performance: An Analysis of Mauritian Small Manufacturing Firms A well designed and implemented working capital management is expected to contribute positively to the creation of a firms value The purpose of this paper is to examine the trends in working capital management and its impact on firms performance. The trend in working capital needs and profitability of firms are examined to identify the causes for any significant differences between the industries. The dependent variable, return on total assets is used as a measure of profitability and the relation between working capital management and corporate profitability is investigated for a sample of 58 small manufacturing firms, using panel data analysis for the period 1998 2003. The regression results show that high investment in inventories and receivables is associated with lower profitability. The key variables used in the analysis are inventories days, accounts receivables days, accounts payable days and cash conversion cycle. A strong significant relationship between working capital management and profitability has been found in previous empirical work. An analysis of the liquidity, profitability and operational efficiency of the five industries shows significant changes and how best practices in the paper industry have contributed to performance. The findings also reveal an increasing trend in the short-term component of working capital financing.

Stein Frydenberg (2004) has done a study on Theory of Capital Structure

This paper is a review of the central theoretical literature. The most important arguments for what could determine capital structure is the pecking order theory and the static trade off theory. These two theories are reviewed, but neither of them provides a complete [28]

description of the situation and why some firms prefer equity and others debt under different circumstances. The paper is ended by a summary where the option price paradigm is proposed as a comprehensible model that can augment most partial arguments. The capital structure and corporate finance literature is filled with different models, but few, if any give a complete picture

RATIONALE OF THE STUDY

Many studies have already been done across the globe on Impact of Working Capital Management & Capital Structure on Profitability. In this study there are three variables: Working Capital Management, Capital Structure, and Profitability of JK Tyre. Here Working Capital Management & Capital Structure is the independent variable and Profitability is the dependent variable. In this study we have found out the Impact of Working Capital Management & Capital Structure on Profitability. As Working Capital is very necessary for smooth running of the business & it has been proven many times that it has an impact on profitability. Similarly, Capital Structure also indicates the wealth of shareholders. This research has opened new dimensions for further study.

[29]

RESEARCH METHODOLOGY
DEFINITION The advanced learner dictionary of current English lays down. The meaning of researcher as, A careful investigation or inquiry specially through such for new facts in any branch of knowledge. Redman & more define " Research as a systamized refers to gain new knowledge" Some people consider, Research as a movement, a movement for the known to the unknown. TYPES OF RESEARCH Their are two types of research are as follows (A) Exploratory research. It includes literature survey and experience survey. (B) Conclusive research. Conclusive research is used for the hypotheses testing generated by exploratory research. It can be classified * Descriptive Research * Experimental Research

Here I have mainly used Exploratory Research i.e. to find the Working capital of the Employees. This chapter deals with research methodology adopted by the researcher. The researcher has conducted the study using both the primary and secondary data.

[30]

DATA COLLECTION METHOD PRIMARY DATA Primary data is a data, which has been collected by the researcher himself to reveal the facts related to the research objective. Generally primary source information is gathered through direct observation, questionnaire, schedule and interview methods.

For our purpose of data collection questioner and interview methods is most suitable because at give accurate data that why we use these methods.

SECONDARY DATA Secondary data are the information, which are attained indirectly. Secondary data are gathered from information collected from the individuals and institutions through personal diaries, letters, survey documents etc. The researcher started the research work with the help of secondary data from various books and magazines. When the researcher collected a fair amount of idea about the type of study that has been conducted and how he should go with it. Then he moved on to the primary sources of data collection. The main source here were the interviews and semi structured questions.

SAMPLE The researcher is partly based on sample survey. It is an integrated component of research of design. It consists of three parts. 1. Population SRF Malanpur, Gwalior 2. Sampling size (number of respondent) - 70 3. Duration of time - 8 week. SAMPLING METHOD I have used Random Sampling method to find the questionnaire from employee. [31]

DATA ANALYSIS & INTERPRETATION

1 Are you aware of your Strength & Weakness?

70 60 60 50 40 40 30 20 10 0 Yes No Series1

60% People are aware about their strength & weakness.

2.

How do you utilize your skills?

90 80 70 60 50 40 30 20 10 0 In Optimistic way In Pessimistic way 18 Series1 82

Most of the People utilize their skills in optimum way.

[32]

3.

How would you rate you learning attitude ?

50 45 40 35 30 25 20 15 10 5 0

46

30 24 Series1

High Level

Middle Level

Low Level

About 46% People rate their learning attitude at high level.

4.

Are you satisfy with the existing appraisal?

80 70 60 50 40 30 20 10 0 Yes No 32 Series1 68

About 68% people are satisfied with the exiting Appraisal [33]

5.

Are you mobile in term of your transferability? (Y/N) if no (Why)

70 62 60 50 40 30 20 10 0 Yes No 38 Series1

About 62% people are mobile in term of their transferability.

6.

Do you feel your total job performance need to be improved?

80 70 70 60 50 40 30 30 20 10 0 Yes No Series1

Only 30% people think their job performance need to be improved. [34]

Q7

Do you feel your work contribution is important?

80 70 60 50 40 30 20 10 0 Yes No 25 Series1 75

About 75% People believe that their work contribution is important..

[35]

FINDINGS
60% People are aware about their strength & weakness.

Most of the People utilize their skills in optimum way.

About 46% People rate their learning attitude at high level.

About 68% people are satisfied with the exiting Appraisal

About 62% people are mobile in term of their transferability.

Only 30% people think their job performance need to be improved.

About 75% People believe that their work contribution is important..

[36]

CONCLUSION
After conducting the Studies on working capital Management in SRF Ltd. I reach on the conclusion that is company uses self appraisal method to Appraise the performance of its employees.

Appraisal method emphasizes human relation, which supervisors focus on Technical knowledge and imitative. This approach:

1) Results in superior upward flow of information, 2) Forces the subordinate to become more personally involved and to some constrains him to think about himself and hi work 3) Improves communication between Superior and subordinate, in that each is given more information by the other when disagreements are discovered and 4) Improves motivation as result of great participation.

But this approach has its disadvantage that the individual may rate himself excessively high than would be if he was rated by the superior. But this disadvantage can be removed considering the following suggestions.

[37]

SUGGESTIONS
Self appraisal should be filled and obtained from the appraise on Monthly or quarterly basis instead of Six monthly/yearly.

Specific duties/assignments should be allotted to every employee in writing, which can help in flexing the responsibility/ accountability on the individuals, so at the time of writing self appraisal by the appraise, he may not rate himself excessively high than it would be.

Views / observations of reporting officer should be communicated to the concerned appraise under his acknowledgement. The comments of the reporting officer should clearly indicate the performance and deficiencies with reasons to appraise so the appraise can further improve his performance

The opportunity should be given to the appraise to submit the reasons of his deficit so the authority can sort out the problem as per norms of the company.

[38]

LIMITATION OF WORKING CAPITAL

1 Error in Rating:- Working capital may not be valid indicator of performance and potential of employees due to the following type of error

a) Halo effect: it is the tendency to the rate an employee constantly high or low on the basis of over all impression.

b) Stereotyping: It implies forming the mental picture of a person on the basis of his age Sex, cast and religion.

c) Central Tendency : It means assigning average rating to the entire employee in order to avoid commitment

d) Constant Error: Some evaluator tends to be lenient while other is strict in assigning performance.

e) Spill over effect: This arise when past performance effect assessments of present performance.

Lack of Reliability: - Reliability employee stability, consistency, in the measurement lack of consistence over time and among different raters may reduce the reliability of working capital

Incompetence: Raters may be fail to evaluate performance accurately due to lack of knowledge an experience

[39]

Negative approach: Working capital losses most of its values with the focus of management is on punishment rather than development of employee.

[40]

BIBLIOGRAPHY
BOOKS

Author

Book Title

Publication Pearson Publication

Edition [Yr.] 6th Edition [2001]

Robbins Stephen P Organization Behaviour Chabra T.N.

Human Resource S. Management Publication New Vishwa

Chand 5th Edition [1999]

Kothari C.R.

Research methodology

Delhi, Second

Prakashans, Year 1999

Websites :

www.srfIndia.com

[41]

QUESTIONNAIRE
PART-I [PROFILE OF EMPLOYEE] : : : : : : [QUESTIONS OF WORKING CAPITAL ]

Name of the Employee Designation Employee Code Grid Code Dept Name Dept Code PART II Q.1

Are you aware of your Strength & Weakness?

Yes

No

Q.2

How do you utilize your skills?

In Optimistic Way

In Pessimistic Way

Q.3

How would you rate you learning attitude ?

High Level

Middle Level

Low Level

Q.4

Are you satisfy with the existing appraisal?

Yes

No

[42]

Q.5

Are you mobile in term of your transferability? (Y/N) if no (Why)

Yes

No

Q.6

Do you feel your total job performance need to be improved?

Yes

No

Q.7

Do you feel your work contribution is important?

Yes

No

Q.8

Please specify the function / processes that you are open to being ?

[43]