SYNOPSIS

TOPIC: WORKNG CAPITAL MANAGEMENT

FOR CARRYING OUT MBA PROJECT WORK AT MYSORE

UNIVERSITY

SUBMITTED BY
PRAVEEN KUMAR A.S
REG NO: 13300100005000000354
KARNATAKA STATE OPEN UNIVERSITY
(UDUPI BATCH)

SUBMITTED TO
CHAIRMAN
DOS&R IN MANAGEMENT
KARNATAKA STATE OPEN UNIVERSITY
MUKTHAGANGOTHRI-570006

WORKNG CAPITAL MANAGEMENT

Chapter I: Introduction:
a. About the topic:
The project undertaken is on ETRNITY DEVELOPERS PRAVITE LIMITED.
It describes about how the company manages its working capital and the various steps that are
required in the management of working capital.
Cash is the lifeline of a company. If this lifeline deteriorates, so does the company's ability to
fund operations, reinvest and meet capital requirements and payments. Understanding a
company's cash flow health is essential to making investment decisions. A good way to judge a
company's cash flow prospects is to look at its working capital management (WCM).
Working capital refers to the cash a business requires for day-to-day operations or, more
specifically, for financing the conversion of raw materials into finished goods, which the
company sells for payment. Among the most important items of working capital are levels of
inventory, accounts receivable, and accounts payable. Analysts look at these items for signs of a
company's efficiency and financial strength.
b. Statement of the Problem
In the management of working capital, the firm is faced with two key problems:
1. First, given the level of sales and the relevant cost considerations, what are the optimal amounts
of cash, accounts receivable and inventories that a firm should choose to maintain?
2. Second, given these optimal amounts, what is the most economical way to finance these
working capital investments? To produce the best possible results, firms should keep no
unproductive assets and should finance with the cheapest available sources of funds. Why? In
general, it is quite advantageous for the firm to invest in short term assets and to finance shortterm liabilities
c. Scope of Study:
This project will be a learning device for the finance student.
Through this project I would study the various methods of the working capital
management.
The project will be a learning of planning and financing working capital.
The project would also be an effective tool for credit policies of the companies.

d. Objectives of the study:

The objectives of this project were mainly to study the inventory, cash and receivable at
ETRNITY DEVELOPERS PVT LTD
To understand the planning and management of working capital at WORKNG
CAPITAL MANAGEMENT
To measure the financial soundness of the company by analyzing various ratios.
e. Limitations of the study
We cannot do comparisons with other companies unless and until we have the data of
other companies on the same subject.
Only the printed data about the company will be available and not the backend details.
Future plans of the company will not be disclosed to the trainees.
Lastly, due to shortage of time it is not possible to cover all the factors and details
regarding the subject of study.
The latest financial data could not be reported as the companys websites have not been
updated.
f. Chapter Scheme
Introduction
Working capital management
Company Profile
Conceptual Frame Work Theoretical Aspects related to topic
Data, Analysis and Interpretation 1. Primary Sources 2. Secondary Source
Summary of Findings, Suggestions and Conclusion Bibliography Annexure
Chapter II: WORKNG CAPITAL MANAGEMENT
MEANING OF WORKING CAPITAL
Working capital means the funds (i.e.; capital) available and used for day to day operations
(i.e.; working) of an enterprise. It consists broadly of that portion of assets of a business which
are used in or related to its current operations. It refers to funds which are used during an
accounting period to generate a current income of a type which is consistent with major purpose
of a firm existence.
DEFINITIONS:
Many scholars gives many definitions regarding term working capital some of these are
given below.

According to Weston & Brigham

Working capital refers to a firms investment in short-term assets cash, short term securities,
accounts receivables and inventories.
Bonnerille
Any acquisition of funds which increases the current assets increases working capital for
they are one and the same.
Positive working capital means that the company is able to pay off its short-term liabilities
companies that have a lot of working capital will be more successful since they can expand and
improve their operations.
Negative working capital means that a company currently is unable to meet its short-term
liabilities with its current assets. . Companies with negative working capital may lack the funds
necessary for growth
THE NEED FOR THE WORKING CAPITAL
The need for working capital arises due to the time gap between production and realization of
cash from sales. Working capital is must for every business for purchasing raw-materials, semi
finished goods, stores & spares etc and the following purposes.
To purchase raw materials, spare parts and other component.
A construction firm needs raw-materials and other components parts for the purpose of
converting them in to final products, for this purpose it requires working capital. Trading concern
requires less working capital.
To meet over head expenses.
Working capital is required to meet recurring over head expenses such as cost
of fuel, power, office expenses and other construction expenses.
To hold finished and spare parts etc.
Stock represents current asset. A firm that can afford to maintain stock of required
finished goods, work in progress & spares in required quantities can operate successfully.
So for that adequate quantity of working capital is required.
To pay selling & distribution expenses.
Working capital is required for repairs & maintenance both machinery as well as factory
buildings.
Working capital is required to pay wages, salaries and other charges
WORKING CAPITAL MANAGEMENT
Working Capital Management refers to management of current assets and current
Liabilities. The major thrust of course is on the management of current assets .This
Is understandable because current liabilities arise in the context of current assets.
Working Capital Management is a significant fact of financial management. Its
Importance stems from two reasons:Investment in current assets represents a substantial portion of total investment.

Investment in current assets and the level of current liabilities have to be geared quickly to
change in sales. To be sure, fixed asset investment and long term financing are responsive to
variation in sales. However, this relationship is not as close and direct as it is in the case of
working capital components.
IMPORTANCE OF 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.
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.
Exploitation of favorable market conditions: If a firm is having adequate working capital
then it can exploit the favorable market conditions such as purchasing its requirements in
bulk when the prices are lower and holdings its inventories for higher prices.
Chapter III: Company Profile
Skyline constructions Housing Private Limited. its Skyline Group company as ETERNITY
DEVELOPRS PRIVATE LIMITED. Is a leading Bangalore based property development firm,
which aims to build the dream homes of its clients and thus make a positive and virtuous
difference in their lives. They are having branches in Mangalore, Chennai.
History: Skyline is one of the leading property developers and constructors in Karnataka, which
started off 125 years back as a family owned enterprise. The firm claims to be the leaders in all
area of property development operations, which range from providing high quality, value added
buildings for its clients to fulfilling the ambitions of their employees. 'Skyline Construction has
become one of the most trusted builders in Karnataka, in just over two decades since its
establishment and recognized by 'CREDAI-KARNATAKA'. Skyline has an excellent and well
dedicated team of architects and engineers under the magnificent leadership of its managing
director, Avinash Prabhu. The ISO certified firm which is well known for its world class quality
spaces and concrete client relationships, has sixty completed projects in their ultra-slick
portfolio, adding up to over four million square feet in residential, commercial and industrial
spaces.
Management:
Avinash Prabhu & Dhiraj Prabhu - Managing Director

Speciality:
Commercial
Residential
THE COMPANYS FOCUS HAS BEEN PURELY ON QUALITY AND BUILDING
CONCRETE RELATIONSHIPS THAT LAST A LIFETIME.
Humble beginnings marked with a resolve and dedication leads to incredible results. 125 years
back Skyline started off as a family owned enterprise with holdings in coffee plantations, later
branching out to property development. In just over two decades since its inception Skyline
Constructions has become one of the most trusted builders in Karnataka and recognized
by CREDAI KARNATAKA.
Skyline recognized the impending opportunities in the property development industry. With a
dedicated team of architects and engineers Skyline started its success story by building worldclass spaces providing outstanding high quality, value added buildings and services to customers
and fulfilling the aspirations of our employees. Skyline Constructions has become one of the
most trusted builders in the state of Karnataka. Skyline Constructions has always acknowledged
the need for creating world-class spaces and has earned respect in the industry with over 60
successful projects, adding up to over four million square feet in industrial, commercial and
residential space. The companys dedication to quality and its integrity was soon recognized with
the ISO 9001 certification.
PARTNERS IN GROWTH
VENTURE CAPITAL
Indiareit Fund Advisors Pvt. Ltd. a leading real estate venture capital fund, managing a corpus of
more than USD 300 Million has invested in Skyline Group. Indiareit has also committed a
substantial amount for the future projects too.
ARCHITECTS PANEL

RSP (Singapore & Bangalore )

Surbana( Singapore )
Team 2
Vernekar Associates
Omar Nisar
Girsh Associates
PRDG Group
George & Carambiah
Zachariah Consultants
Kabir Hira

LANDSCAPING FIRMS
Site Concepts ( Singapore )

Terra Firma
NIWA Associates
Design Milieu
Design Cell

STRUCTURAL CONSULTANTS
Potential, Semac, Naushad Ali, Design Cell, Manohar Consultants, Prakash B V, Arun
Associates, Manjunath professional
SERVICE CONSULTANTS
Entask, Potential, Semac, Epithelil, S K Associates, Sankalpa, Micro Systems, Gupta Associates
Chapter IV: Conceptual Frame Work
WORKING CAPITAL= CURRENT ASSETS CURRENT LIABLITIES
There are two major concepts of working capital:
Gross working capital
Net working capital
Gross working capital:
It refers to firm's investment in current assets. Current assets are the assets, which can be
converted into cash with in a financial year. The gross working capital points to the need of
arranging funds to finance current assets.
Net working capital:
It refers to the difference between current assets and current liabilities. Net working
capital can be positive or negative. A positive net working capital will arise when current assets
exceed current liabilities. And vice-versa for negative net working capital. Net working capital is
a qualitative concept. It indicates the liquidity position of the firm and suggests the extent to
which working capital needs may be financed by permanent sources of funds. Net working
capital also covers the question of judicious mix of long-term and short-term funds for financing
current assets.
Significance of Working Capital Management
The management of working capital is important for several reasons:
For one thing, the current assets of a typical manufacturing firm account for half of its total
assets. For a distribution company, they account for even more.
Working capital requires continuous day to day supervision. Working capital has the effect on
company's risk, return and share prices,
There is an inevitable relationship between sales growth and the level of current assets. The
target sales level can be achieved only if supported by adequate working capital Inefficient
working capital administration may lead to liquidation of the firm if it is not in a position to meet
its liabilities and commitments.

Types of Working Capital Needs

Another important aspect of working capital management is to analyze the total working capital
needs of the firm in order to find out the permanent and temporary working capital. Working
capital is required because of existence of operating cycle. The lengthier the operating cycle,
greater would be the need for working capital. The operating cycle is a continuous process and
therefore, the working capital is needed constantly and regularly. However, the magnitude and
quantum of working capital required will not be same all the times, rather it will fluctuate.
The need for current assets tends to shift over time. Some of these changes reflect permanent
changes in the firm as is the case when the inventory and receivables increases as the firm grows
and the sales become higher and higher. Other changes are seasonal, as is the case with increased
inventory required for a particular festival season. Still others are random reflecting the
uncertainty associated with growth in sales due to firm's specific or general economic factors.
The working capital needs can be classified as:
Permanent working capital
Temporary working capital
Permanent working capital:
There is always a minimum level of working capital, which is continuously required by a
firm in order to maintain its activities. Every firm must have a minimum of cash, stock and other
current assets, this minimum level of current assets, which must be maintained by any firm all
the times, is known as permanent working capital for that firm. This amount of working capital is
constantly and regularly required in the same way as fixed assets are required. So, it may also be
called fixed working capital.
Temporary working capital:
Any amount over and above the permanent level of working capital is temporary,
fluctuating or variable working capital. The position of the required working capital is needed to
meet fluctuations in demand consequent upon changes in production and sales as a result of
seasonal changes.
FACTORS DETERMINING WORKING CAPITAL REQUIREMENTS
There are many factors that determine working capital needs of an enterprise. Some of
these factors are explained below:
Nature or Character of Business.
The working capital requirement of a firm is closely related to the nature of its business. A
service firm, like an electricity undertaking or a transport corporation, which has a short
operating cycle and which sells predominantly on cash basis, has a modest working capital
requirement. Oh the other hand, a manufacturing concern like a machine tools unit, which has a
long operating cycle and which sells largely on credit, has a very substantial working capital
requirement.
Sintech is a manufacturing concern so this requires them to keep a very sizeable amount in
working capital.

Size of Business/Scale of Operations.

Snitch has a good position in its segment and they are also spending their operations in
the domestic market as well as in foreign market. The scale of operations and the size it holds in
the market makes it a must for them to hold their inventory and current asset at a huge level.
Rate of Growth of Business.
The rate of growth of sales indicates a need for increase in the working capital
requirements of
the firm. As the firm is projected to increase their sales by 69% from what it was in 2009, it is
required to guard them against the increasing requirements of the net current asset by way of
efficient working capital management. The sales and projected sales level determine the
investment in inventories and receivables.
Price Level Changes.
Changes in the price level also affect the working capital requirements. It was the reduced
margins in the price of the raw materials that had prompted them to go for bulk purchases thus
making on additions to their net current assets. They might have gone for this large-scale
procurement for availing discounts and anticipating a rise in prices, which would have meant that
more funds are required to maintain the same current assets.
Chapter V: Data, Analysis and Interpretation
The data will be collected through the questionnaires. The data collected will be coded
and analyzed by using averages, percentage, graph charts and so on.
Chapter VI: Summary of Findings, Suggestions and Conclusion Bibliography Annexure
Summary:
The financial status of Eternity developers Pvt ltd. is good.
In the last year the inventory turnover has increased, this is good sign for the company.
The companys liquidity position is very good With regard to the investments in current assets
there are adequate funds invested in it. Care should be taken by the company not to make further
investments in current assets, as it would block the funds, which could otherwise be effectively
utilized for some productive purpose. On the whole, the company is moving forward with
excellent management
Finding:
Working capital of the Eternity developers Pvt Ltd. was increasing and showing positive
working capital per year.
The company has used its dividend policy, purchasing, financing and investment
decisions to good effect can be seen from the inferences made earlier in the project

Suggestions:
Working capital of the company has increasing every year. Profit also increasing every
year this is good sign for the company. It has to maintain it further, to run the business
long term.
The Current and quick ratios are almost up to the standard requirement. So the Working
capital management. Eternity developers Pvt Ltd. is satisfactory and it has to maintain it
further.
The company has sufficient working capital and has better liquidity position. By efficient
utilizing this short-term capital, then it should increase the turnover.
The company should take precautionary measures for investing and collecting funds from
receivables and to reduce the bad debts.
The company has sufficient working capital and has better liquidity position. By efficient
utilizing this short-term capital, then it should increase the turnover.

BIBLIOGRAPHY
TEXT BOOKS
M.Y.Khan / P.K Jain, Financial Management Text, Problems Cases, 5TH Edition,Tata
McGraw Hill Publishing Company Limited, New Delhi, 2007.
Prasanna Chandra, Financial Management Theory and Practice, 5TH Edition,
Tata McGraw Hill Publishing Company Limited, New Delhi, 2001.
Annual Report of Eternity Developers Private Limited.
WEB SITE VISITED
www.google.com
www.wikipedia.org
www.skylineconstructions.com

DR. K.C. KUSUMAKAR HEBBER

INTERNAL GUIDE